Social Media Competitions In Australia: Legal Guide For 2021

Stephen von Muenster

March 1, 2021

Stephen von Muenster

March 1, 2021

From Instagram competitions, to Facebook “tag your friends to bring them on a tropical paradise holiday”, to simply submitting your most embarrassing date stories for a pamper session, competitions, or promotions, are a great way for brands to increase awareness, promote their goods or services and even generate new followers. However, competitions can be a complex field to navigate thanks to the numerous Federal, State and Territory laws and regulations that govern them.

Although a complex topic, here is our simplified guide to Competitions 101 to avoid getting into hot water.

Game of skill, chance or both?

Promotions are categorised into two types: games of chance and games of skill. The type of promotion you run will affect the mechanic of the competition and how you select your winner(s).

Games of Chance

If a promotion involves any random element, it is deemed to be a game of chance. Each entry in a game of chance must have a fair and equal chance of winning. Games of chance include promotions with the following mechanic:

    1. Barrel or electronic draw, i.e. “purchase a specially marked product, visit the Promoter’s website and complete the entry form to go into the draw to win a prize”;

    2. First past the post, i.e. “the first 100 entrants to purchase a product will each receive a prize”; and

Games of Skill

A Game of Skill describes a promotion where entrants are individually judged against a pre-defined and objective criteria on the basis of skill and no possibility of a tie. Skill in this context, may involve writing the best response to a promotional question or capturing the best photo, according to the judges. 

 

Gaming laws and regulation

All promotions in Australia are subject to the consumer protection requirements under the Australian Consumer Law (ACL) in Schedule 2 of the Competition and Consumer Act 2010 (Cth). Under the ACL, a person must not, in trade or commerce, engage in conduct that is misleading or deceptive (Section 18), make a false or misleading representation about goods or services (Section 29) or offer any rebate, gift, prize or other free item with the intention of not providing it at all or as offered (Section 32).

Gaming law and regulation vary between each State and Territory, so national promotions must comply with all of the requirements of each of these. Trans-Tasman promotions must also comply with New Zealand’s lottery laws and regulations. 

If a promotion contains any element of chance, the promotion must comply with the lottery laws in each State and Territory in which the promotion is conducted. Lottery laws vary between each State and Territory and therefore national promotions must comply with all the requirements of the individual lottery laws in all States and Territories. Trans-Tasman promotions must also comply with New Zealand’s lottery laws. Depending on where the promotion will be conducted and the total maximum value of the prize pool, the Promotor (or agent on their behalf) may be required to obtain permits from the ACT and SA regulators, and a Gaming Authority from the NSW regulator. 

Further, electronic drawing systems used to randomly draw winners in a promotion will require prior approval from the South Australian lottery department (if the promotion is conducted in South Australia). Once an electronic drawing system is approved, it can be used for all future promotions that use the system to draw winners. The New South Wales lottery department also requires the promoter to obtain certain electronic draw procedure reports (if the promotion is conducted in New South Wales), which may be called upon at any time. 

Permit / Authority

For Games of Chance, you may be required to obtain permits or a Gaming Authority for your competition depending on where the promotion is being conducted and the total value of the prize pool. The permit fee is calculated based on the total maximum recommended retail value including GST of all prizes to be awarded in the applicable State or Territory.

  • In ACT you will require a permit if the total maximum prize value is greater than $3,000.

  • In SA, you will require a permit if the total maximum prize value is greater than $5,000. Unless the promotion has an instant win mechanic, in which case the promotion will require a permit regardless of the prize value.

  • In the NT, you will require a permit if the total maximum prize value is greater than $5,000. If the promoter has obtained a lottery permit in another state or territory, you can also run the lottery in the NT without a local permit. 

  • In NSW, you will require a Gaming Authority if the total maximum prize value is greater than $10,000. Once the Promoter has obtained a Gaming Authority, the Authority provides duration-based permission to conduct promotions and distribute prizes of $10,000 or more for a period of 1, 3 or 5 years. The Promoter must provide a copy of the terms and conditions (T&Cs) to the NSW regulator for each separate promotion at least 10 working days before the proposed promotion takes place. 

This means that a National promotion with a total prize pool of less than $3,000 WILL NOT require permits from any State or Territory (unless it’s an ‘instant win’ entry mechanic, in which case you will require a permit from SA). However, you still need to meet the requirements of each State and Territory lottery department to conduct a compliant promotion.

Despite the absence of permits and a formal review process, WA, QLD, VIC and TAS all have standing requirements for promotions which must be complied with. Where the prize pool brings the promotion under the threshold in permit states across NSW, SA and ACT, the promoter must still comply with the requirements of their lottery departments.

Entry must be free

This is a big one. Entry into a promotion must be free, however the Promoter may require entrants purchase their product at the recommended retail price in order to enter the promotion. The Promoter may also require entrants to enter the promotion via a communication mechanism (such as mail, telephone or SMS) at a cost not exceeding $0.55 AUD including GST (except in VIC, where the maximum entry cost is $0.60 AUD including GST).

Terms and Conditions

All relevant information on a promotion, including the rights of the Promoter and limitations on entry and prizes, must be disclosed to entrants at time of entry into the promotion via a set of ‘terms and conditions’ or ‘conditions of entry’. The T&Cs for a promotion must be readily accessible by entrants before they enter the promotion in order to be enforceable. Entrants cannot be charged to access the terms and conditions.

  • For promotions involving an element of chance, the T&Cs must be approved by the lottery departments in each State and Territory in which a permit is required to conduct the promotion. 

  • Any randomised electronic draw must be conducted using a drawing system that has been approved by the SA lottery department and issued with an Electronic Draw Approval number (EDA). In the absence of an EDA, the draw must be conducted manually (i.e. pulling paper entries out of a hat). 

  • Additionally, if the promotion involves any electronic element and is conducted in Western Australia, the final terms and conditions must be provided to the Western Australia lottery department prior to the start of the promotion. 

Advertising

If artwork for a promotion does not contain the full T&Cs, the artwork must include a reference to where the full terms and conditions may be accessed. The promotional artwork must also contain certain minimum disclosures, or ‘abbreviated T&Cs’, required to adequately communicate the promotion to consumers for compliance with the various State and Territory lottery laws and the Australian Consumer Law. 

Amendments

If any amendments are made to the T&Cs of a promotion after the permit application has been submitted to a lottery department, the lottery department must be notified of the proposed amendments. If the lottery department has already processed and granted permit approval, an amendment application must be lodged. Amendment fees are payable in the ACT and SA. 

Once a promotion has commenced or its advertising is live in the marketplace, lottery departments will not generally allow any amendments to a promotion. As a result the promotion must therefore be run in accordance with the representations and disclosures made to consumers via the advertising for compliance with the ACL as well as the T&Cs originally approved by the lottery departments.

Data and Privacy

Following the Digital Platforms Inquiry by the Australian Competition and Consumer Commission (ACCC), attention to data and privacy in the media, tech and communications sector is changing considerably. Specifically, the spotlight is on consumer’s being able to make ‘informed choices’ about the handling of their data and the current and future consequences of providing their data.

In the ACCC’s view:

  • The practice of using clickwrap agreements, take it or leave it consents, and bundling numerous consents is very problematic and results in legally questionable consumer consent

  • Privacy Policies that are too long, complex, vague, and difficult to navigate are also problematic – particularly where consumers may not be aware about this data being used for targeted advertising and third-party data sharing within these Privacy Policies

  • Privacy Policies that appear to protect consumers, but where the policies are not followed in practice are also problematic

  • Generally, it is the ACCC’s position that Australian privacy regulation should be more closely aligned with the GDPR’s higher standards of protection

Data and Privacy is an area that will have knock on effects for those running promotions going forward. Specifically, ensuring data hygiene and modern collection disclosures and privacy policies.

Probity

From 1 July 2020, the NSW lottery department has made changes to its Trade Promotions processes, requirements, and its reporting obligations. 

An annual audit of all promotions conducted is now required if the sales proceeds of all gaming activities in one year exceeds $250,000. If you are of the view that you or your client’s promotional activity in a financial year is likely to generate proceeds of this amount, you will need to make preparations for an audit and you may need to obtain advice from your accountant.

As a baseline, for probity, having a scrutineer oversee all draws conducted, and maintaining adequate record keeping documentation in the form of scrutineer documentation for auditing purposes, is recommended.

Conclusion

This is our ultimate guide to running competitions. Although primarily black and white, often there are some elements that are a little less crystal clear.

If you have any questions about legal compliance or protecting the rights and reducing the risk to the Promoter, please contact von Muenster Legal. von Muenster Legal specialises in providing a diverse range of legal and commercial services to the advertising, marketing, and media industries for more than 20 years. 

Article by Stephen von Muenster, Partner and Stephanie Scott, Senior Solicitor

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