Whether you’re an influencer or an entrepreneur, one of the most popular and effective ways of marketing on social media is by doing a giveaway. A giveaway is the term commonly used on social media to denote a promotional contest. Giveaways generally involve giving away products, tickets or some other type of prize to users of a social media platform who choose to enter. There are a few ways users can usually enter to win the giveaway, including, but not limited to liking or sharing a photo or video, tagging one or several friends in the comments section and following one or several accounts on a variety of platforms.
All in all, the giveaway can be an effective tool for a business or influencer as it encourages engagement (an essential component of a successful social media account) and helps raise awareness of the brand by having the desired content propagated quickly across multiple user accounts.
Although a giveaway is run on social media and uses likes, shares comments and follows to enter, it’s pretty much no different than a promotional contest. Contest law is complex and should not be overlooked by businesses and influencers who use social media to run giveaways.
To help businesses and influencers navigate the wild world of contest law, I wanted to provide some basic legal information about promotional contests. I plan to follow up this post with another about the specific legal issues raised by an influencer or entrepreneur’s use of social media to run a contest. However, today I will just be introducing you to some basic concepts of contest law. Please note that this blog post only touches upon some preliminary legal information with respect to running contests in Canada and does not deal with all the laws that may come into play, such as provincial laws and others. This blog post should not be interpreted as legal advice.
Alright, let’s get down to it.
The two principal laws that someone running a contest would need to watch out for are the Criminal Code and the Competition Act. Both laws contain prohibitions and requirements that contest sponsors should be aware of and understand in order to legally run a contest.
1. Criminal Code
First thing’s first, when you’re running a promotional contest, you’re going to want to make sure it is not a lottery. That’s because running a lottery without a license is a criminal offence.
The Criminal Code prohibits a person from awarding a prize, such as money or goods, on the basis of mere chance (essentially, a lottery). Even where the prize is awarded based on a game of mixed chance and skill, the game would still be considered an illegal lottery if the participant is required to pay money (or other valuable consideration) to enter.
Okay, so how do you run a giveaway without making it a lottery and violating the Criminal Code?
You simply have to remove one of the elements that makes it a lottery. You could remove the prize (the money or goods given away), but that’s not a realistic option because, without a prize, what’s the point? On the other hand, you could remove the element of chance completely and make the game a purely skill-based competition. Unfortunately, that could require additional time and effort (e.g. finding a panel of judges, developing a score card with criteria to ensure participants are judged fairly, etc.) and is not a viable option for many contest sponsors.
Short of making your contest a pure-skill competition, the only option remaining to avoid your contest being considered a “lottery” is to (a) award your prize on the basis of mixed chance and skill and (b) to remove any payment or pruchase requirement to enter the contest.
In order to make your contest a game of mixed chance and skill, you need to add some type of skill-based element. In Canada, the addition of a reasonably difficult skill-testing question will generally be sufficient to meet this requirement. Usually, the skill-testing question will take the form of a relatively complex math equation.
Not only that, but participants in a contest cannot be required to buy or purchase an entry into the contest (“No purchase necessary” – whether it’s buying a product or providing other valuable consideration). If you want participants to purchase something or provide some form of payment to enter the contest, then you also need to offer a secondary entry option that is completely free (for example, an option to send in a handwritten letter instead).
For entrepreneurs and influencers who intend to run a giveaway on social media, it’s crucial to consider the legal aspects of contests. Just because you’re running your contest on Instagram, doesn’t mean you’re immune from the law. Participants should not be chosen at complete random and valuable consideration, under any form, should not be required to enter the giveaway. It is prudent to obtain legal advice prior to running any form of contest, be it on social media or otherwise.
With respect to contests and giveaways on social media, participants will often be required to like and share photos, follow other social media accounts and tag friends. This begs the question: are likes, shares, follows and tags considered “valuable consideration” under the Criminal Code?
Unfortunately, the relevant provisions of the Criminal Code are not clear as to what “other valuable consideration” may include, and there is almost no case law on this specific question. As personal information becomes more and more valuable, and marketing tactics evolve, we may see the courts address this question in the future.
2. Competition Act
In addition to the Criminal Code, the Competition Act prescribes other requirements when running a contest. Contest sponsors are required to comply with the following:
- They must provide “adequate and fair disclosure” to participants, such as the value, number and nature of the prizes, regional allocations, and chances of winning.
- That participants must be selected, and the prizes distributed, based on chance, skill or a mix of both. For example, simply giving the prizes to your friends or family would likely violate this requirement.
- The prizes must be distributed without any unnecessary or arbitrary delays.
Among other things, under the requirement of adequate and fair disclosure, the disclosure would need to be made before the participants enter the contest. Because contests usually have rules and regulations that can go on for pages, sponsors need an efficient method to get key information across about the rules when advertising for the contest, such as eligibility and the closing date. It’s unrealistic to have to provide the full rules every time the contest is mentioned and the legalese would kind of take away the fun of entering the contest in the first place.
In response to this issue, one thing contest sponsors are doing to comply with the adequate and fair disclosure requirement is to provide a miniature version of the rules wherever the contest is advertised. This allows potential participants to be informed of key aspects of the contest before signing up. Sometimes referred to as “short rules” or “mini rules”, this practice has been adopted by many companies and contest sponsors to ensure compliance with the Competition Act.
According to the Competition Bureau, short rules should include:
- The number and value of prizes;
- Any regional allocation of prizes;
- The skill-testing question requirement, if any;
- Details as to the chances of winning;
- The contest closing date; and
- Any other fact known to the advertiser that materially affects the chances to winning.
All in all, it is important to adhere to the laws regulating contests, otherwise contest sponsors could face criminal and civil consequences (such as fines). Remember that, at the end of the day, a contest is also a contract. As such, rules and regulations are essential to protecting yourself and ensuring a compliant and successful contest. This blog post only briefly touches upon the complex nature of contest law, and there may be other laws that apply, depending on the specifics of a given contest.
If you are running a contest or giveaway, you can Contact Us to inquire about issues relating to contest rules (drafting, reviewing and interpretation), ensuring your contest complies with applicable legislation, and other related matters.
Author: Catherine Nadeau Mijal