Competitions (also known as trade promotions, lotteries, sweepstakes or giveaways) can either be a great way to promote your business, or it can be the entire basis for your business model (similar to the increasingly popular LMCT+ business model). In both circumstances, we have seen how a well-designed trade promotion can create a buzz through word of mouth, increase awareness of your brand and what you do, and even attract media attention!
Trade Promotions can be a win-win for your business and your customers however, it’s vital to ensure that the Trade Promotion is legally compliant. The legal considerations for each Trade Promotion will vary depending on:
- the kind of contest being hosted (whether it will be a random chance winner or a game of skill);
- the prizes and their value;
- which states you are running the competition; and
- what structure are you running the competition (ie. LMCT+ style or a traditional one-off competition).
Trade promotions are regulated in Australia and the laws vary between different competition types, prizes and dollar values as well as between the States and Territories. Whether a permit is required depends on the type of competition, the total prize value, the type of prize and the State or Territory the competition is taking place in.
What is a LMCT+ style Trade Promotion?
A trade promotion competition is a free-entry competition that a business conducts to promote its goods or services. Trade promotions must meet the following criteria:
- you as the promoter must have an Australian Business number (ABN) or an Australian Company Number (ACN);
- the purpose of the competition must be to promote your goods and services;
- entry should be free; and
- anyone can participate as long as they are not part of the promotion or benefiting from it.
If you are considering an LMCT+ style membership-based trade promotion, then the structure you are considering could be one where you offer membership packages (ie. Gold, Silver, Bronze) which provides access to some sort of benefit (such as discounts, access to merchandise etc), then with the purchase of a package, the customer receives a free entry into the competition. The key is that entry must be free in order for the promotion to be categorised as a trade promotion.
For example, if your members are paying a monthly subscription, then the subscription must be tied to something that is not just the entry into the active giveaways. As an example the membership tiers could be broken down into:
- Bronze: $15 per month for 10% off all merchandise, access to Bronze exclusive discounts from suppliers, early access to content and one free entry into all active giveaways
- Silver: $20 per month for 20% off all merchandise, access to Silver exclusive discounts from suppliers, early access to content and one free entry into all active giveaways and an additional free entry each month of the Membership for a period of 6 months.
- Gold: $65 per month for 30% off all merchandise, access to Gold exclusive discounts from suppliers, early access to content and one free entry into all active giveaways and 6 free entries into any promotions and giveaways at the members choices.
Do I need a permit?
Whether or not you need a permit or approval to run your trade promotion will depend on the type of trade promotion you are running; total prize value of the trade promotion; and states or territories in which you are conducting the trade promotion.
In general, you will need a permit in:
- New South Wales: if your prize value is $10,000 or over.
- Australian Capital Territory: if your prize value is $3,000 or over.
- South Australia: if your prize value is $5,000 or over.
- Northern Territory: if your prize value is $5,000 or over and you do not already have a permit in another state or territory.
Fees for each permit will vary depending on the duration of the permit and the size of the prize.
You do not need a permit if 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.
Other Legal Documents
In addition to the Permits, we recommend the following legal documents when conducting a Trade Promotion:
- Competition Terms – This is the key document you need to run a trade promotion, and it must be compliant with each States’ trade promotion laws.
- Membership Terms – Where your competition or promotion is run on a membership basis, specific terms and conditions must be drafted to protect your business. These will govern the relationship between your company and each member, ensuring that liability is properly allocated if any legal disputes arise.
- Website Terms and Conditions – General terms and conditions for your website.
- Agreement with Prize Suppliers OR Discount Suppliers – If you have an ongoing relationship with prize or discount suppliers then you would want an agreement to ensure they honour these arrangements for your members.
- Company Establishment – If you do not already have one, we generally recommend a company structure to run your business.
- Trade mark – We highly recommend having a trade mark registered early as it is difficult to deal with a name change once you have already invested time, effort and money into your brand.
The listing of any person, organisation, product or service in this article (including references to LMCT+) does not constitute, in any way, any form of affiliating, association or endorsement of that person, organisation, product or service. For the avoidance of doubt Gladwin Legal has no association or affiliation with LMCT Plus.
This article was written by Supipi Amarasekera.