Running a Legally Compliant Competition: Essential Must-Knows for Success

O*NO! You’ve decided to run a competition to elevate your agency - but without careful consideration they can go from lead magnets to legal liabilities real quick. Even though competitions are an effective way to increase brand awareness, increase social media presence, launch a service or product, re-engage your existing client base, or increase your client database, they can also carry several legal requirements.  

These legal requirements differ across the states and territories, but many are broadly similar. No matter where you run your competition, not meeting these rules can land you and your business in legal hot water. To avoid being caught out, here are a few things you should consider before running your next competition.  

Can I run a competition? 

In most cases yes. If you are a business that sells a product or provides a service, then you are eligible to run a trade promotion competition promoting those products or services. If you are running the competition to promote another business, that business will need to consent and may need to abide by further conditions. 

What information should be provided about the competition? 

The rules of the competition must clearly be provided to potential participants. This is so participants can make informed decisions about their participation. Trade competitions must not involve conduct that is likely to mislead or deceive, which means you must disclose details of any relevant conditions or limitations before entry – meaning you must nail your terms and conditions (T&C’s). The requirements for your T&C’s will differ depending on where you run your competition, but regardless of the various state/territory laws, there a few general matters to consider:  

• Your competition should not encourage breaking the law; 

• You must provide information about the prize or prizes – in some states this may just be the nature of the prize, whilst in some it may include the value (eg. South Australia); 

• A trade promotion must be free to enter – however purchasing a good or service as a requirement for entry is permissible;  

• If entrants must purchase raffle tickets, this does not count as free entry. These types of competitions come under different rules than trade promotions; 

• You should not imply that winning the competition can resolve financial problems; 

• Your T&C’s should indicate how the competition will proceed, how prizes can be won or winners will be determined and how often;  

• Not everything can be a prize! For example, in some state alcohol cannot be the sole prize (eg. Northern Territory); and  

• All trade promotions or competitions in Australia are subject to the Australian Consumer Law. If you do not provide accurate information, or make any false or misleading statements (including not offering prizes as promised), then there are large penalties at play. The message here is walk the walk and talk the talk – deliver what you promised.  

The T&C’s should be included on any advertisement for the competition. In case this is not possible, in certain states, details about where the rules can be found, such as a website, must clearly be indicated on the advertisement. If the competition is also being advertised through audio/video mediums, such as the radio or video hosting platform, the advertisement must convey the T&C’s or direct participants to where they may find them.  

Once advertised, you should avoid changing the rules, as you must stick by the promises you have made to your clients and the public. However, if the rules have changed then you must take all the reasonable steps to notify the participants of the changes, or make this information publicly available, within a reasonable time before the competition takes place or concludes. In some states you may also need to notify the regulator that you have changed the rules.  

Each state and territory also carries rules about how, where, and in some instances when, the name of the winners must be published.  

Do I need to get a permit or licence to run my competition?  

There are two main categories of trade competitions: 

• Games of skill: are contests judged upon merit where the entry usually requires creativity, like ‘tell us why you should win’ or a photo/caption competition. The ‘skill’ refers to an input by the participants. A true game of skill should be based on the entrants submitting original entries – not where they must submit a ‘correct’ answer, otherwise there may also need to be an element of chance in deciding the winner. 

• Games of chance: are competitions where there is an element of chance in selecting the winner, such as prize draws that require a random draw to pick the winner/s. If your competition involves both elements of chance and skill in determining the winner, it will need to abide by the rules for games of chance. 

Each state and territory has different rules. If you are running your competition across Australia, then you will need to check the laws in each state or territory.  

When it comes to running a game of chance type trade promotion, you should check the permit/licence requirements of each state/territory. Whether a permit is required may depend on the value of the prize/s. 

For games of chance, the current permit requirements are: 

• Required in NSW if the prizes are over $10,000; 

• Required in ACT if the prizes are over $3,000; 

• Required in SA if the prizes are over $5,000; 

• Required in NT if the prizes are over $5,000 (unless you have a permit in another state or territory); and  

• For the other states, permits are not required to run trade promotions.  

Games of skill are less regulated than games of chance and will not require any permits to run. But it is still important that your terms and conditions ensure you are fully legally protected. 

Can I run my competition through social media?  

Absolutely, and running it through social media is one of the cheapest and most effective ways of getting word out about your trade competition. You should always link your own T&C’s, and not imply that the social media company endorses or is associated with your competition. 

It must be noted that each platform has its own rules. 

Facebook require you to:   

• Link to your competition’s terms and conditions;  

• Sort your licence and permit requirements;  

• Include statements releasing Facebook from association and liability; and  

• If on Facebook, avoid asking that people tag their friends, share on their timeline, or share on their friends’ timeline to enter.  

Instagram rules are similar, but there’s nothing against tagging or sharing as a means of entry. Just don’t ask people to tag themselves in photos they’re not in, or otherwise inaccurately tag photos.  Threads will also follow these rules.

LinkedIn and Tiktok don’t have any specific guidelines regarding the running of trade competitions. The former however requires any competition to comply with their User Agreement, whilst the latter, in their T&C’s, require all activity to comply with their community guidelines. Generally, the regulations require compliance with IP laws, specifically the copyright of participant entries, and maintaining authenticity and integrity, specifically prohibiting the spread of misinformation or spam activity.  

Twitter and YouTube also have their own promotional guidelines.  

Can I collect participant information or are there privacy issues with this? 

When running your competition you should include a privacy collection notice and abide by the Privacy Principals if the Privacy Act applies to your business. But in many cases you won’t be able to use the information you collect from your entrants outside of running the competition, without stating in your conditions of entry how you will do so. Even if this is already covered in your privacy policy, or if you don’t have a privacy policy, you will need to gain consent through your competition T&C’s to send marketing content to participants or otherwise generate leads through your trade promotion. 

Key Takeaways: 

• Know the rules under which your competition or giveaway needs to comply; 

• Always publish promotional T&Cs in compliance with the relevant state or territory; 

• Check your social media platform guidelines; 

• Consider whether winners will be chosen at random (chance) or upon merit (skill); 

• If a game of chance, work out whether you need to apply fora licence or permit, based on the value of the prize;  

• If you do need a permit, each state has their own application process. Allow plenty of time for your applications to be approved. You also need to have your T&C’s ready to submit to the relevant authority at the application stage; 

• Ensure that you have privacy policy in place, and all entrants are linked to it upon entry; and  

• When in doubt check your state or territory trade promotion regulations.  

Next Steps: 

Struggling with the legals of your competition? Start by downloading our free competition checklist or building your terms and conditions with the new template from our online store!  

Boring legal stuff: This article is general information only and cannot be regarded as legal, financial or accounting advice as it does not take into account your personal circumstances. For tailored advice, please contact us. PS - congratulations if you have read this far, you must love legal disclaimers or are a sucker for punishment.