Giveaway competitions like those promoted by LMCT Plus* have become a popular marketing strategy for businesses. People love to win free products and services, which makes giveaway competitions an effective way for businesses to gain customers, clients and brand awareness. However, businesses looking to run an LMCT Plus type trade promotion must consider the legal framework of these competitions to avoid serious legal consequences. This article outlines what businesses need to consider in running LMCT type competitions to ensure legal compliance.
*we have no association or affiliation with LMCT Plus.
What is an LMCT giveaway?
LMCT type giveaways offer promotions to customers who sign up for an ongoing membership. Essentially, this type of giveaway is a trade promotion which automatically enters members into competitions to win prizes.
What is a trade promotion?
A trade promotion is a competition that is free to enter and conducted to promote the goods or services of a registered business. Each Australian state has different legal framework surrounding trade promotions, and businesses looking to run an LMCT Plus type competition should be aware of the relevant laws.
Permits to run an LMCT giveaway
Businesses looking to run a LMCT Plus type trade promotion may need to apply for a permit under the relevant state law. Whether you will need a permit depends on:
- Whether you are running a game of chance or game of skill;
- The prize value of your trade promotion;
- The type of trade promotion you are conducting; and
- The location where your trade promotion is conducted.
A game of chance is a trade promotion with a randomly selected winner, such as by drawing a name out of a hat. LMCT Plus types of giveaways will generally fall within this category. Conversely, a game of skill is a trade promotion where the winner is selected by merit. For example, the winner may have the best answer to a question of where they would travel with the prize money. A permit is not required to conduct a game of skill trade promotion in Australia.
More information on whether you need a permit to run your LMCT type giveaway can be found here.
Terms and Conditions of your LMCT giveaway
Businesses should ensure they have clear and thorough Terms and Conditions (T&Cs) before promoting or running their competition. Generally, if you are obtaining permits you will need to submit your T&Cs to the relevant regulator.
While T&Cs are easily overlooked, they are crucial to limit your liability as a business and avoid hefty fines, legal disputes and penalties. The T&Cs are a legally binding document which entrants must agree to before entering your competition. It should clearly set out the rules of entry, and where any liability falls if something goes wrong.
Key questions to consider in developing your terms and conditions include:
- How does the competition operate?
- What rights does each entrant have?
- What happens if the prize is faulty or doesn’t arrive?
- What happens if the prize selection system malfunctions?
Misleading and deceptive conduct in your promotion
Businesses should ensure they are not engaging in any misleading or deceptive conduct when running their promotions. This includes any advertisements, actions or imagery which may mislead or deceive consumers in relation to your giveaway. For example, if you include a photograph of three new Teslas in your advertisement, but are actually just giving away one, this may be considered misleading and deceptive.
A breach of the misleading and deceptive conduct provisions can result in hefty penalties under the Australian Consumer Law. Accordingly, businesses should ensure they are accurately representing their LMCT type giveaway, especially in relation to prizes.
- LMCT Plus giveaways are a type of trade promotion which automatically enter members into competitions to win prizes.
- The promotion must be separate to the business which offers some type of goods or services to members/customers.
- The entry into the promotion must be for the purpose of promoting your core business and must be free to be considered a trade promotion.
- Businesses considering running these promotions must make sure they have any permits and authorisations required by relevant state laws.
- Businesses should have clear competition rules set out in Terms and Conditions and Privacy Policies before running their business or promotion.
- Businesses should watch out for any potential misleading and deceptive conduct in relation to advertising and prizes of their competition to avoid hefty penalties under the Australian Consumer Law.