Advice & Tips Ask an Expert November/December 2021

Q: What do I need to know about holding an online giveaway to promote my business?

A: As a new franchisee, you’ll have to put a lot of effort into promoting the opening of your business. In a post-COVID-19, remote-working world, where people still spend a lot of time at home and are less likely to stumble upon your location as they go about their day, you may well find yourself turning to digital marketing and one of its most popular tools: an online giveaway. This is a type of promotional contest where participants can win by simply “tossing their name into a hat.”

Online giveaways are an excellent way to increase the visibility of your business and connect with people who are interested in trying what your business has to offer. Knowing your obligations under the law is key to ensuring that your marketing effort doesn’t spell trouble with the franchisor or the government.

1. The giveaway must be legal

Usually, the giveaway host asks participants to fill out a basic form to enter a draw. On social media, users are instead commonly asked to like and/or leave a comment under the giveaway post. The winner is usually drawn randomly.

When planning the giveaway, it’s important to make sure that it doesn’t fall within the definition of a lottery prohibited by the Criminal Code. It’s illegal to hold games of chance and games of mixed chance and skill for “goods, wares, or merchandise” if the participant “pays money or other valuable consideration.”

In light of this definition, note the following tips:

  • Include a no-purchase-necessary option and make it clear to participants that no purchase is required.
  • “Valuable consideration” doesn’t necessarily mean money. It can be anything of value to the giveaway organizer. To stay in the clear, don’t make participation conditional on the performance by the participant of anything beyond what’s strictly necessary to account for them in the circumstances. Among other things, requiring that the participant share the giveaway post on their social media page or tell a number of friends about it may be considered “valuable consideration.”
  • Include a skill test requirement that the winner should pass in order to qualify for the prize. Often, it’s a simple mathematical question.

2. State the terms clearly

More requirements for giveaways are found in the Competition Act. When hosting a giveaway, you must provide “fair and adequate” disclosure of its terms. At a minimum, such disclosure should indicate:

  • The number and approximate value of the prizes. For goods and services, it’s normally the approximate regular market value. If the value is difficult to quantify due to external factors, it’s acceptable to indicate a value range or a few representative examples.
  • The area or areas in which you’re holding the giveaway. For example, your giveaway may be limited to residents of the town or city where your business is located, or it may be province-wide, Canada-wide, or even international.
  • If you’re giving away more than one prize, whether there is allocation to different areas and if so, what it is.
  • The rules of the giveaway, which should clearly describe the way the giveaway works and anything that materially affects the chances of winning. Among other things, known chances of winning, “early bird” prizes, and the giveaway process for series of prizes are all interpreted as such material facts. The public must be able to easily access the rules. The access cannot be conditional on a purchase, nor can it require a trip to your location.

3. Pay attention to local laws and websites’ policies

If your business is located in Quebec, the giveaway is not open to international residents, and the prize is worth more than $100, you must register the contest with the Régie des alcools des courses et des jeux (RAJC) and pay the associated fees. When the giveaway is over, you’ll also need to submit the winner’s information to the RAJC. Depending on the value of the prize, other requirements may apply. If the giveaway is open to international residents, this requirement no longer applies.

As you’ll be collecting personal information from participants, ensure that you do so in compliance with the Personal Information Protection and Electronic Documents Act (PIPEDA) or the applicable provincial privacy laws. You must also obtain consent of the participants to communicate with them about the giveaway or your business.

If you host a giveaway on social media or other third-party websites, pay attention to their policies, as they may contain additional requirements or mandatory disclosures for giveaways.

Yulia Vasilyeva
IP, Franchise, Business and Entertainment Lawyer
Jones & Co