This article provides an overview of contest regulation in Canada, including the relevant legal frameworks and primary considerations surrounding each. If you are involved in organizing contests or promotional activities in Canada, it is important to understand and comply with these laws in order to mitigate risk and avoid potential liabilities.
There are many legal requirements that apply to running a contest in Canada. In particular, sponsors will need to ensure that their contest complies with the following pieces of legislation:
- The federal Criminal Code;
- The federal Competition Act; and,
- Québec's Act respecting lotteries, publicity contests and amusement machines and Charter of the French Language, as applicable.
In addition, sponsors will need to ensure that their contest complies with other legal requirements and guidelines relevant to their contest's particular mechanics—for example, privacy laws, intellectual property laws, social media platform terms, influencer disclosure guidelines, etc.
We explore each of these legal requirements in greater detail below.
The Criminal Code
The Canadian Criminal Code prohibits various forms of betting, including contests that require participants to pay, make a purchase or provide other valuable consideration as a condition for entry or winning. To avoid being classified as an illegal lottery, contests must incorporate an element of skill and not require payment or valuable consideration, with limited exceptions. Understanding the following will help you ensure compliance and prevent criminal offenses:
- The requirement for an element of skill
Contests often employ a mathematical “skill-testing question” to introduce a skill component, ensuring compliance with the Criminal Code. The question must be answered correctly by potential winners before they can receive any prizes. Typically, a mathematical question consisting of four parts and that follows the order of operations (i.e., BEDMAS) is used, in keeping with what Canadian courts have historically deemed acceptable. The question should have a reasonable level of difficulty and require an answer without mechanical or other aid. By following the proper order of mathematical operations and avoiding inconsistencies, you can ensure a legally sound skill-testing question.
- The “No Purchase Necessary” (“NPN”) rule
The Criminal Code generally prohibits giving away prizes in games of chance, or mixed chance and skill, when participants must pay money or provide valuable consideration to enter. It is essential to offer an alternate “no purchase necessary” method of entry and uphold the principle of “equal integrity,” when a “pay-to-play” component exists. This principle ensures that all participants, regardless of their method of entry, have an equal chance of winning.
To comply with equal integrity requirements, participants who choose the NPN option should not be disadvantaged compared to those who pay to participate (for example, NPN participants should be able to receive the same number of entries as purchase participants). Typically, an alternative NPN method of entry is offered in the form of an essay “mail-in” method of entry, which allows for an entrant to submit a short (50 word) essay on a topic to a designated address by mail in exchange for an entry.
The Competition Act
The federal Competition Act regulates contests held for the purpose of promoting business interests or the sale of products and services in Canada. To ensure compliance, consider the following key requirements:
- Adequate and fair disclosure of prize details
Contest materials and rules should provide clear and transparent information about the number of prizes available to be won. The approximate retail value of each prize must also be disclosed. A detailed description of each prize should be included as well (using brand names and model numbers, if possible, with appropriate consent). Ensure that any items associated with the prize but not included as part of it are expressly excluded.
- Disclosure of regional prizes and other material facts
If prizes are allocated on a regional or other basis, clearly disclose this information and provide details about the regional allocation. Additionally, disclose the odds of winning each prize and any other known factors that may materially affect the chances of winning. Ensure that the distribution of prizes is not unduly delayed, and prizes are awarded in a timely manner.
- Comprehensive disclosure on packaging and promotional materials
The Competition Act requires that all packaging, advertising and other promotional materials relating to the contest include disclosures of the number and approximate value of available prizes, of any regional allocation of the prizes and of any other fact that materially affects the chances of winning. These disclosures should be made in a reasonably conspicuous manner before potential entrants are inconvenienced or committed to the contest. It's important that contest sponsors also conform with other applicable laws, such as the Criminal Code, when making the required disclosures.
Disclosure requirements are typically met by including contest “mini rules” within contest-related promotional materials. While the exact wording needed to meet disclosure requirements will vary depending on the nature and specifics of each contest, the most common elements found in mini rules are:
- the number and value of prizes;
- any regional allocation of prizes;
- the requirement and nature of the skill testing question;
- details as to the chances of winning;
- the contest closing date/time/time zone;
- a “no purchase necessary” statement; and;
- a hyperlink that directs to the full rules.
Québec-specific considerations
Québec has its own regulatory framework for contests and lotteries, which supplements the federal requirements outlined above. It is crucial to pay special attention to these rules when organizing contests open to Québec residents. To ensure compliance, consider the following requirements:
- Filing and tax obligations
Promotional contests open to the public in Canada including Québec, or exclusively in Québec, must be registered with the Régie des alcools, des courses et des jeux, unless the total prize value is under $100. For contests that require registration, the contest's sponsor will be required to file with the Régie a prescribed form and the text of the official rules, and pay a non-refundable duty fee (the amount of the fee and the deadline for registration depend on the value of the prizes).
The text of the official rules require Québec-specific language. Any amendments, extensions or withdrawals of contests that have been launched also require Régie pre-approval. Additionally, the Régie may request a signed security agreement, copies of contest-related advertising, and after the contest concludes, the submission of a “winner's list” for prizes valued at $100 or more.
- Minimum disclosure requirements in advertising
Contest materials used in Québec must include specific minimum disclosure requirements. This includes stating the number, description and values of the prizes offered, mentioning the nature of the skill-testing requirement if participation requires a purchase, and providing information on how eligible entrants can obtain the contest rules.
- Additional considerations
Other considerations for contests in Québec include retaining contest entry forms/ballots for a specific period, and generally restricting entry by children under the age of 13 (to comply with Québec's broad prohibition against advertising to children).
The rules of the Charter of the French Language in Québec also generally apply, requiring that sponsors provide rules, websites and other contest-related materials in French for the Québec market.
Further contest requirements
In addition to the rules discussed above, sponsors will need to ensure that their contest complies with other legal requirements and guidelines that may apply depending on the particular mechanics of the contest. To ensure compliance, consider the following requirements:
- Privacy laws: Contests in Canada must comply with applicable privacy laws. Notably, contest-related email advertising, as well as any “opt-in” to receive marketing emails from the sponsor included within a contest entry form, must be compliant with Canada's Anti-Spam Law (“CASL”).
- Intellectual property laws: To the extent that a contest uses a particular campaign name or prize name, it's important to ensure that there are no issues regarding third party trademarks. When in doubt, use of generic terminology will help to limit legal risk. Where a contest requires the submission and/or use of participant content, ensure that the contest rules incorporate appropriate licensing language and safeguards to help ensure that only compliant content is submitted.
- Social media platform terms: Social media platform terms of use typically include requirements for hosting or advertising contests through the particular platform. Some platforms also prohibit certain contest-related activities. Before launching a contest on social media, ensure the applicable terms are reviewed for compliance.
- “Material Connection” disclosures: Canada's advertising industry guidance and Competition Act guidance include rules for disclosing “material connections” in advertising (for example, using #Ad on social media). For contests that require participants to publicly post or engage in similar promotional activities to enter, the fact that their promotion is incentivized by earning a contest entry must be clearly disclosed (for example, by including #ContestEntry on social media).
- Minors: Note that a minor in Canada may be anyone under 18 or 19 years of age, depending on the particular province or territory. Generally, if a contest is open to participation by minors, they should only be permitted to participate on condition of having received parent/legal guardian consent and should not be permitted to participate if the prizing is restricted to use by adults.
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