With the rise of social media, one of the best ways to promote your business online these days is to run an online competition (also called a trade promotion). Below we unpack the different types of competition and key things to look out for so you can run your next online competition with ease.

What are the main types of competition

There are 2 main types of competitions:

1.     Game of chance

A game of chance is a game where everyone who enters has the same chance of winning and winners are picked at random. Examples of games of chance are lotteries or social media posts where, for example, to win a free copy of a bestselling cookbook, you must follow the account and tag a friend.

2.     Game of skill

A game of skill involves an entry of some type using skill and the winners are chosen by the merit of the entry, either by judges or a vote. Examples include being asked to submit a video entry or writing 25 words or less about why you should win a competition.

Games of chance have more regulation than games of skill.

But regardless, there are 2 key pieces of law you should be aware of when running a social media competition, particularly if you are running a game of chance:

1.     State and/ or Territory-based laws and regulations surrounding trade competitions; and

2. Misleading/deceptive conduct under the Australian Consumer Law.

Competition laws/regulations

Games of Skill

For games of skill, generally, these are quite straightforward and require no additional permits or other specific regulations to be aware of other than the normal misleading/deceptive conduct laws set out below.

Games of Chance / Trade Promotions

However, for games of chance or trade promotions, the laws and regulations become more complex and specific. These laws are State or Territory based, depending on where your trade promotion will be held in Australia. This means that if you are running an Australia-wide competition, you need to ensure you are complying with all regulations.

Details on the regulations for each State / Territory for a game of chance/trade promotion are set out below:

In general, if you run a game of chance/ trade promotion, in addition to obtaining a permit (where required, depending on your state or territory in Australia), the following rules also apply across most of Australia:

·       entries must be free or, if part of the sale of a product, not cost more than the value of the product;

·       the competition must be for the benefit of promoting the business or product;

·       the winner must be determined by chance;

·       competition terms and conditions should clearly state Details of how to enter, full prize details, value of the prizes, start and closing date of the competition, and how winners are drawn and notified; and

·       employees or family members are not permitted to enter.

Misleading / deceptive conduct

The other important thing for businesses who are running competitions on facebook or Instagram or online/ in store to be aware of is that they cannot mislead consumers under the Australian Consumer Law (ACL).

Under the ACL, any information or claim that a business provides about its products or services must be accurate, truthful and based on reasonable grounds. This applies to all communication by a business including marketing and advertising.

For trade promotions, some States / Territories will have specific guidance around the marketing and advertisement of the competition.

As a general rule, when advertising or marketing your competition, you should:

·       clearly show the rules of the competition;

·       not exaggerate prizes or suggest the chance of winning is better than it really is;

·       include a description of the prize or prizes on offer; and

·       direct participants to where the competition terms and conditions can be found.

Competition Terms and Conditions

You can see that whether you are running a game of chance or game of skill, you should have competition terms and conditions (Terms) to go with the competition you are running and the entry to the competition should be dependent on the person who is entering agreeing with the terms.

Competition terms and conditions should clearly set out:

·       whether the competition is a game of skill or chance;

·       the start and end dates;

·       eligibility criteria for entries / participants;

·       entry requirements;

·       winner selection process; and

·       prizes available.

We have a competition terms and conditions template available from our online shop here.

Key takeaways

If you are looking to run your own competition online, the first thing you should do is determine if you are running a game of chance or skill. For games of chance, you need to make sure that you’ve checked what rules and regulations apply to you in the State or Territory that you will be running the competition and that you’ve obtained permits if they required.

For both types of competition, it is important that you do not misrepresent the competition when advertising or marketing it, including in relation to the chances of winning or prizes on offer. We recommend that competition terms and conditions be prepared for your competition before you launch it.

[Author of Blog - Lianne Tan - Ready to Boss Legal, published 23 May 2023]