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ARTICLE Business TipsMarch 2, 2015

Before you run an online competition, read this

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Running an online competition or giveaway can be a brilliant way to engage with your customers, raise your profile, gather contact details and reward a few lucky people with a great prize. But are you fully aware of the laws and your specific legal obligations regarding online competitions?

If you think that you can simply stick a competition up on Facebook to engage with your followers, then think again, warns LegalVision’s Legal Practice Director Emma Jervis.

While online and social media have made it far easier for brands and businesses to run competitions, all competitions in Australia are subject to laws and regulations, regardless of the platform used. Plus, social media channels each have their own rules about competitions and giveaways.

Jervis answers some of the main questions business owners need to consider before they run an online competition.

You need to navigate a variety of legal issues when setting up or running an online business. That's why we have teamed up with LegalVision to provide you with a one-stop solution for all your legal document needs. 

1. Do I need a permit for my competition?

In Australia, the legislation around competitions varies slightly from state to state. In general, the need to get a permit depends on whether the competition is a game of skill or a game of chance. If it is a game of chance, which means the winner is drawn randomly, then you need a permit. 

2. How do I get a permit for my giveaway?

You need to make an online application to your state gaming board, such as the NSW Office of Liquor, Gaming and Racing

3. What do I do if I am running a competition throughout Australia?

If you are running a nationwide competition, you need to apply for a permit for each state. Usually, the competition’s core terms and conditions are the same and then they need to be tweaked slightly to comply for each relevant state. If you are running a competition in just one state, you only need a permit for that particular state. 

4. Do I need terms and conditions for my competition?

Simply put: yes!

The competition’s terms and conditions should cover any liability that could arise from the competition. For instance, if you are giving away a trip to China as a prize, you don’t want to be held liable for any loss that may occur on that overseas trip.

The terms and conditions should also properly describe the prize, clearly state what is and is not included in the prize and the methodology of drawing the winner. They should also make clear the jurisdiction of the competition and they should include waivers and rights.

A good approach is to draft your terms and conditions and publish these on your website. Then include a link back to the website wherever you are publicising the competition.

5. Can I run or publicise my competition on social media?

Yes, but be aware that social media platforms usually have their own rules surrounding competitions – including Facebook. You should familiarise yourself with each social network’s own particular policies and check what they say in regard to how competitions can be run.

She adds that the state offices of liquor, gaming and racing are starting to look more closely at competitions on Facebook and if companies are found to be in breach of the law, they can potentially be banned from running Facebook competitions in the future. 

6. What are the most common issues with competitions on social media?

Businesses often run into issues around copyright regarding competitions.

If you are asking entrants to submit any work, including images, the creator of the work automatically owns the copyright attached to that work. Businesses often go on to use the work for promotional purposes, but you cannot actually reproduce that work without the express permission of the owner, otherwise you are in breach of intellectual property, including registered trademarks.

The other area to think about concerns the competition prizes and how you are planning to publicise this. For instance, if a retailer is offering items as a prize, the copyright for those items rests with the brands, not the retailer. So you need to check with the third party about which photos or images you can use to promote your own business. 

7. What prizes can’t I give away in my competition?

There are restrictions on giving away liquor and cigarettes. Liquor can be a prize, but the competition and terms and conditions must be closely monitored. Other rules also apply, such as the responsible service of alcohol and people under the age of 18 not being able to enter. 

8. Can I charge people to enter my competition?

No – you can’t charge a fee to enter a competition. If you want to charge people to enter a competition then it would be classified as a lottery and different laws and permits would apply.

While you cannot charge an entry fee for a giveaway, a competition can be linked to the acquisition of goods and services at the recommended retail rate. For instance, if people buy a loaf of bread, they could then be eligible to enter a competition being run by that bread brand or retailer. If a competition uses mobile phone text messaging as the entry mechanism, the entrant can be charged for that text message. 

9. Where can I get more information?

Each state body provides more information and detailed explanations online. For instance, the NSW Office of Liquor, Gaming and Racing provides an online step-by-step guide to the process. There are also online fact sheets available on the complaints process.

Businesses that haven’t run a big competition in the past should get a lawyer to look over their competition and draft appropriate terms, so they can determine what permits could apply. 

10. What can happen if I don’t adhere to the laws around competitions?

You could be subject to the investigative process of your state’s office of liquor, gaming and racing. They can stop you running the competition and ban the competition if you are doing anything illegal. In those cases, they can also refer you to other bodies, such as the police.

You can also be subject to private actions, for instance if the prize is not properly described or if there are claims for copyright from individual entrants that could be pursued.

Companies have been sued in regard to breach of copyright with competitions – this is especially the case where work has been submitted as part of a competition.

Don’t just put up a competition on Facebook – go through due process. Make sure you plan a month out to get the terms and conditions in place and to get the permits that you need.

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