A trade promotion is an activity which includes an element of chance, or mixed skill and which is conducted for the purpose of promoting goods or services provided by a business. Examples of trade promotions includes promotions where entry is made with an entry form, with no skill required and the prize is drawn from a barrel, or promotions where the skill is not able to distinguish a winner (e.g. fill in the missing letters Bird & B_rd). Each Australian state and territory has its own laws and regulations in relation to trade promotions so it is important that any promotion comply with the laws of each state and territory where the promotion will operate.
What are the key changes for trade promotions in NSW?
From 1 July 2020, a trade promotion is permitted in NSW if:
- No entry or other fee is charged to participate (however purchasing a product at its normal retail value as a condition of entry is still permitted);
- Written consent is obtained from an authorised person of the business benefitting from the trade promotion; and
- If the total value of all the prizes exceeds $10,000, the person conducting the trade promotion must hold an ‘authority’ and otherwise conduct the promotion in accordance with the requirements.
The ‘authority’ application process replaces the previous permit application process. An authority is issued for a selected time period (either 1, 3 or 5 years) and allows multiple promotions to be run under a single authority. Once an authority is obtained, notice must be given to NSW Fair Trading of the terms of the promotion at least 10 working days before the promotion is to commence where the total prize pool value is over $10,000.
The changes to the laws in relation to trade promotions allow greater flexibility in the terms and conditions. Now, the rules for a trade promotion must comply with the general requirement for fairness and transparency, which are set out in more detail in the Regulation. Further, there has been the introduction of a penalty notice for infringements of the new legislation. Now, an authorised officer may issue a penalty notice to a person if they consider the person has committed a particular offence under the new laws. The penalty notices vary in amount from $220 to $1,100 per offence.
My business runs trade promotions regularly – what should I do?
- Revisit any template terms and conditions to make sure they are compliant with the new laws. It is important to check that any terms and conditions comply with the new rules, as well as the laws of any other state or territory where eligible entrants to your promotion reside. This is particularly the case as there are penalties for breaches of the new laws, in addition to the penalty notices mentioned above. Some of the penalties include:
- failure to award the prize to the winner of a competition attracts a maximum penalty of $5,500. It is a defence if reasonable inquiries were made but the prize winner could not be located.
- if a person associated with the conduct of a trade promotion converts to their own use any prize the maximum penalty of $22,000, or imprisonment for 5 years, or both.
- if a person, with intent to defraud, conducts a trade promotion (other than a game partly of skill and partly of chance) so that not all participants have an equal chance of winning, the maximum penalty is $5,500 or imprisonment for 6 months, or both. In circumstances where a game partly of chance and partly of skill is conducted fraudulently, the maximum penalty is $5,500 or imprisonment for 6 months, or both.
- depending on the nature of the offence, each trustee or other person who was a member of the governing body may also be personally liable if they knowingly authorised or permitted the failure to comply. The maximum penalty is $5,500.
- Consider applying for an authority early if you anticipate having high value trade promotions. Given that an authority is a pre-requisite to operating a trade promotion with a total prize pool over $10,000, it is important that your time lines for launching a trade promotion take into account applying for and receiving an authority, as well as the notice period of the terms as mentioned above.
- Check trade promotion advertising to ensure it is compliant. There are offences in the Regulation which prohibit a person publishing advertisements promoting a gaming activity such as a trade promotion which:
- encourages a breach of the law;
- depicts children participating in the trade promotion;
- suggests that winning will be a definite outcome of entering or participating in the gaming activity; or
- suggests that entering or participating in the trade promotion will improve a person’s financial prospects.
The maximum penalty for a breach of the advertising provisions is $5,500.