Sharon Groom is a member of the KNOWlaw Group of Toronto law firm McMillan Binch.

Running a contest can be a great way to generate interest in your new film or reality TV series, or to lure people to your website.

Here are some simple rules to follow to make sure your contest is legal. This article isn’t meant to replace the advice of a good lawyer, but it should help you get started.

Illegal lotteries

If the contest that you’ve dreamed up has the three elements of: (1) a prize, (2) chance and (3) any form of payment or consideration, then what you have on your hands may be an illegal lottery under the Criminal Code. The potential penalties for running an illegal lottery are stiff, and even include jail time.

Since a prize is a given in most contests (or no one would bother to enter), contest sponsors look at ways to avoid the other two elements, namely ‘chance’ and ‘payment.’

The element of chance

In order to avoid having a contest decided by chance alone, most companies use the time-honored ‘skill-testing question.’ In order to work, the question has to be reasonably difficult and should be time limited.

Since the courts have not been very consistent about what constitutes an element of skill (for example, guessing how many jelly beans in a jar was said to involve skill whereas shooting a turkey at 50 yards was not!), most companies use a math question, and one that has at least double-digit numbers.

Strictly speaking, the skill-testing question should be administered after the potential winner has been chosen or you may be back in the situation of being seen to be deciding the contest by chance.

Payment

Unless your contest is going to be determined on pure skill alone (and these contests need to be carefully configured), you’re not permitted to ask for any sort of payment in order to enter the contest or any other implied form of consideration.

For instance, if the entry form is on the side of a cereal packet and you have to purchase the cereal to enter, that is consideration. A substantial expenditure of a contestant’s time can also be consideration, such as having to sit through a presentation. Requiring Internet access to enter may also be consideration.

So, make sure you provide a clear and relatively easy way for someone to enter without having to purchase anything or provide any other form of consideration. Permitting handwritten facsimiles of an entry form is one way. Or point-of-purchase entry forms that don’t require an advance purchase. If the contest is being run online, allow entries by mail and limit the entries to one per person, not per e-mail address as you shouldn’t assume that everyone has his or her own e-mail account.

Contest rules

Even if the contest you’re running isn’t illegal under the Criminal Code, you could still fall afoul of the law if you mislead consumers about the contest.

The Competition Act requires that various facts about the contest must be made clear to entrants before they commit to the contest. If it would be difficult logistically to make all the rules known to contestants before they enter (for instance, if the contest is being advertised on the packaging of a product), then you should make sure you at least set out a short list of rules on the package or at the point of purchase, and include a method for contestants to obtain the full rules.

The short rules should include:

* the number and approximate retail value of prizes

* the fact that no purchase is necessary

* the method of obtaining a copy of the full rules

* the odds of winning and any regional allocation of prizes

* the skill-testing question requirement

* the contest closing date

* any other fact known to the advertiser that materially affects the chances of winning.

Website contests

If your contest is taking place on the Internet, then the contest rules can be available by hyperlink, but the link should be highly visible and easy to access so that the rules are likely to be read. You may also want to be more specific about the contest closing date and specify a closing time, to deal with online entries.

For Internet contests, don’t forget to include some disclaimers. These should state that the contest is subject to the laws of Canada and is only open to residents of Canada (and, for the reasons set out below, you may want to exclude Quebec) who have reached the age of majority in their province of residence. If you want to include other countries then you need to make sure your contest is legal according to the laws of that country.

Also, it’s wise to limit the age of participants to exclude children unless you are prepared to undertake the more rigorous due diligence that is required to legalize the contest if it’s going to be directed at minors.

You should also include a disclaimer relating to computer error (as if that ever happens) so that you are not liable if entries sent by e-mail are lost or corrupted, or the website has a virus that infects the entrant’s computer, or the whole entry system crashes and the contest has to be canceled… you get the idea. The disclaimers can be provided by hyperlink as long as the link is obvious and clearly labeled.

Privacy issues

If your company is a federal business, or provides information across Canada for profit, then the federal Privacy Act applies to you now, and in any event it, or substantially similar provincial rules, will apply to all businesses in Canada in January 2004.

So, what can you do with all the personal information you may collect from contest entrants? First, you need to decide if the information is truly ‘personal’ or not. Personal information is information about an identifiable individual but does not include typical business card information such as name, title, business address and phone number.

If the information you have gathered is personal, then you need to make sure individuals can have access to it if they request it, that it is securely protected and that you have obtained the person’s consent in advance for any use you intend to make of the information.

You should also ensure that the information you collect is kept current and that it is only kept as long as necessary for the purposes stated when it was collected.

If you are going to share the information with a promotional partner, make sure the contestant is informed of this in advance, and that you have an agreement with the partner whereby they agree to comply with all the provisions of the relevant privacy legislation.

Quebec

Quebec has its own law regarding contests. If a contest is open to residents of Quebec then the contest must be provided in French. There are also some special contest rules and notices applicable to Quebec.

If the value of prizes that will be awarded exceeds $2,000 then the full force of the law is brought to bear and includes the responsibility to file with the Quebec government the following items:

* a notice of holding a contest 30 days before the contest commences as well as payment of a duty, which can be as high as 10% of the total prize value

* any advertisements for the contest and the contest rules 10 days before it starts

* a written report after the contest finishes detailing who won the prizes and confirming that they have been delivered

* a security bond if the prize value exceeds $20,000.

The bottom line

Now you know the fundamentals. Keep in mind these basic concepts, get some legal review of the contest in good time before it runs and have some fun being creative!

(This article contains general comments only. It is not intended to be exhaustive and should not be considered as advice in any particular situation.)

-www.mcbinch.com