LMCT plus

How do I run a competition like LMCT Plus?

Running giveaway competitions like LMCT Plus* can be an effective way for your business to gain customers, clients and brand awareness. These types of competitions are called trade promotions, and have specific requirements under the law. This article sets out what you need to run a legally compliant trade promotion.

*Gladwin Legal has no association or affiliation with LMCT Plus

 

What is an LMCT giveaway?

LMCT Plus is an organisation which offers promotions to customers who sign up for an ongoing membership. These types of trade promotions have recently become popular amongst businesses. Under an LMCT Plus type of trade promotion structure, members are automatically entered into competitions to win prizes.

Many businesses which begin running LMCT Plus type trade promotions do not realise that trade promotions have a complex legal framework across Australia. Failure to set up a legally compliant trade promotion can result in significant penalties for the business.

 

What is a trade promotion?

trade promotion is a competition or giveaway that is conducted to promote the goods or services of a registered business. Trade promotions can be either a ‘game of chance’, where the winner must be randomly selected or a ‘game of skill’, where the winner is selected by merit, for example, because the entrant had the most creative answer on where they would travel with the prize money.  In both instances there must be no fee to the entrant and the purpose of the promotion must be to promote the goods and services of the business.

While membership-based trade promotions like LMCT Plus are a popular way of running competitions, trade promotions come in other forms. Another well-known example of a trade promotion Macca’s Monopoly, where people can enter the competition by purchasing participating menu items and scanning their tickets.

 

How do I run a competition like LMCT Plus?

The main legal requirements for running a membership-based trade promotion like LMCT Plus are Competition Terms, Membership Terms, and permits for the relevant states or territories in which you are running your promotion.

Competition Terms are a tailored set of terms and conditions for your promotion, and covers information such as rights of entrants, rules of the competition, limitation of liability, privacy, and winner entitlements. Many states and territories require you to upload your promotion terms and conditions when you notify the relevant Regulator that you are running your trade promotion.

Membership Terms govern the relationship between your business and its members. This is relevant if you are selling a membership as your business model.  This legal document helps to clarify the rules and obligations of members, and reduce the chances of any legal dispute arising regarding membership it also clarifies the relationship and can assist in evidencing the legitimacy of your main business (eg the membership model).

Each state and territory has a different Regulator for trade promotions. Generally, you must apply to the relevant regulator for a permit or authority to run your competition, depending on the prize pool and location of your trade promotion.

 

When do I need a permit or authority?

Businesses will need a permit or authority to run their trade promotion depending on the location and total prize amount of their competition, as set out below.

  • New South Wales: You will need an authority if your prize value is $10,000 or over.
  • Australian Capital Territory: You will need a permit if your prize value is $3,000 or over.
  • South Australia: You will need a permit if your prize value is $5,000 or over.
  • Northern Territory: You will need a permit if your prize value is $5,000 or over and you do not already have a permit in another state or territory.

You do not need a permit where your trade promotion is conducted in Tasmania, Victoria, Queensland or Western Australia. However, you will still need to comply with the requirements of the relevant Regulators, such as specific lodgement rules or provisions in your Competition Terms and Conditions.

 

What else do I need to run a competition like LMCT Plus?

Many sole traders who would like to limit the risk that they face from running a business choose to start a company for the purpose of running a trade promotion or business like LMCT Plus.

If you are considering setting up a business and offering a trade promotion then its likely you will need:

  • Proper corporate establishment, including lodging required forms with the Australian Securities & Investments Commission (ASIC), director consents, corporate register, share certificates
  • Trade mark registration, to protect your brand from competitors and copycats
  • A tailored privacy policy which sets out how you use and collect personal information of entrants and members
  • Website Terms and Conditions for your business website or mobile app
  • A prize suppliers agreement to limit your liability and protect your business when entering commercial arrangements with your prize suppliers, such as car dealerships or technology companies.

 

Key takeaways

  • LMCT giveaways are a type of trade promotion which offers members the chance to participate in a trade promotion to win a prize
  • Businesses considering running a LMCT giveaway must make sure they are legally compliant
  • The main requirements for businesses running a membership-based trade promotion are Competition Terms, Membership Terms and Permits

Gladwin Legal are experts in trade promotions law and have extensive experience in advising businesses. If you would like to know how we can help, please contact us at or 1300 033 934.