Law Firm Borden Ladner Gervais LLP On US Companies Running Contests In Canada

^[1]National legal firm Borden Ladner Gervais ^[1] agrees that contests can be an effective way for companies to market themselves, but whether it’s a car give-away or an opportunity to travel to exotic locales, there are rules that protect Canadians from being misled, and crossing that legal line can create serious legal and reputational risk for U.S. companies operating north of the border.

The Supreme Court of Canada recently ruled against Time Inc. and Time Consumer Marketing Inc. for a marketing promotion that was misleading, ordering them to pay $1,000 in compensatory damages and $15,000 in punitive damages, and thereby affecting their reputation. The plaintiff in this case had received an “Official Sweepstakes Notification” that encouraged him to believe he had won a cash prize of US$833,337. He didn’t notice the inconspicuous clauses in smaller print that said his win was conditional upon his coupon being selected as the winning ticket. His coupon wasn’t selected.

Most contest regulation in Canada falls under the Criminal Code (Canada) and the Competition Act (Canada), although there are also separate provincial regulations, most notably in Québec, and intellectual property and privacy legislation can also come into play. There are also guidelines and rules specific to media such as Facebook and Twitter.

“In today’s environment, as businesses and other organizations try to differentiate themselves and be ‘novel’ and ‘cutting edge’, it’s easy to be on the wrong side of the law,” said BLG lawyer Victoria Prince. “The Canadian context is not exactly the same as that in the U.S. and companies need to be aware of the dangers inherent in what may seem like small differences.”

• To remain on the right side of the law, contests must not fall into the realm of an illegal game, which occurs when awarding a prize as part of a game of chance, or when awarding a prize to a contestant who pays money or otherwise expends valuable consideration as a part of a game of chance or game of mixed chance and skill. Thus, contests in Canada often provide a “no purchase necessary” option and require a potential winner to answer a skill-testing question before being awarded a prize.
• The Competition Act requires certain important information to be published for entrants to review prior to entering a contest. It generally is acceptable in an online environment, however, to post the noteworthy instructions up front and then link to the full contest rules.
• If a contest is open to residents of the Province of Québec, ensure extra time is afforded to deal with matters such as complying with French language requirements and registering rules with the Régie des alcools, des courses et des jeux for contests with prizes exceeding $2,000.
• Contests may raise intellectual property issues, notably because of the use of trade-marks and copyrighted material in contest-related materials.
• Where a contest involves user-generated content, whether in the form of musical, artistic, dramatic or literary work (e.g., a songwriting contest), careful consideration needs to be given to deal with copyright issues, including the waiver of moral rights.
• Because contest sponsors collect personal information in contest entries, they must comply with applicable privacy laws.
• Other legal considerations include: the participation of minors, ambush advertising, and whether there are regulatory rules (e.g., contests related to liquor) or rules of other third parties (e.g., a contest administered through Facebook).

“As companies and charities work harder to grab attention in an increasingly crowded and noisy world, it’s important they understand the rules,” said lawyer Victoria Prince. “Contests can seem like a benign type of marketing, but a misstep can create more harm than benefit.”