Trade promotions are a popular way for businesses to increase their customer base and generate excitement for a new product or service. However, businesses should ensure that they are operating their trade promotion in accordance with the relevant legal framework to avoid serious consequences. This article will outline the key legal issues in running trade promotions to ensure that your business is legally compliant!
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. Generally, a trade promotion will fall into one of two categories:
- Game of chance: The winner is randomly selected, for example, by drawing a name out of a hat.
- Game of skill: 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.
Permits and authority to run your trade promotion
Each Australian state has a different legal framework surrounding trade promotions, and you may need a permit or authority in order to run your competition. This will depend on:
- The prize value of your trade promotion,
- The type of trade promotion you are conducting, and
- The location where your trade promotion is conducted.
There is no requirement for an authority or permit to conduct a ‘game of skill’ trade promotion across Australia. However, you may need a permit to conduct a ‘game of chance’, depending on the prize money and location of your trade promotion.
- New South Wales: You will need an authority to conduct your trade promotion in NSW if it promotes a trade or business and the total prize value is over $10,000.
- South Australia: You will need a permit if your competition is a ‘major trade lottery’ where the total prize value exceeds $5,000. You will also need a permit for any ‘scratch and win’ trade promotion, regardless of the prize money.
- Northern Territory: You will need a permit if your competition is a ‘major trade lottery’ where the total prize value exceeds $5,000. However, you won’t need one if you already hold a permit in another state or territory.
- Australian Capital Territory: You will need a permit for your trade promotion if the total prize value is over $3,000.
- No permit or authority is required to conduct a trade promotion in Victoria, Western Australia, Queensland or Tasmania.
Terms and conditions of trade promotions
To avoid liability, businesses should have a Terms and Conditions for their trade promotion which is accessible wherever the competition is promoted. A Terms and Conditions is a legally binding document which sets out the rights and obligations of the competitors and business in relation to the trade promotion. Key provisions in your Trade Promotion Terms and Conditions may include:
- An explanation of the competition and its rules
- Rights of each entrant
- Limitation of liability clauses
Misleading and deceptive trade promotions
Businesses should ensure they are not engaging in misleading or deceptive conduct in running their trade promotion to avoid significant penalties under the Australian Consumer Law (ACL). Misleading and deceptive conduct includes any advertisements, actions or imagery which would cause a false representation about the competition. For example, if you included a photograph of a large bundle of technology in your advertisement but were only giving away a pair of earphones to the winner, this may be considered misleading and deceptive.
Importantly, your intention as a business is not taken into consideration when establishing misleading and deceptive conduct. Accordingly, businesses should take extra steps to ensure they are accurately representing their trade promotion, especially in relation to prizes.
- A trade promotion is a competition that is free to enter and conducted to promote the goods or services of a registered business.
- Businesses may need a permit or authority to run their trade promotion, depending on the type of competition, value of prize money and location of their competition.
- Businesses should include a Terms and Conditions wherever they advertise their trade promotion to limit their liability.
- Businesses should ensure they are not engaging in misleading or deceptive conduct when running or advertising their trade promotions to avoid significant consequences under the ACL.