Canadian Contest Law Terms - N-S | CANADIAN CONTEST LAWYER

CONTEST RULES AND PRECEDENTS

Do you need contest rules/precedents
for a Canadian contest?

We offer many types of Canadian contest/sweepstakes law precedents and forms (Canadian contest/sweepstakes law precedents for running common types of contests in Canada). These include legal precedents for random draw contests (where winners are chosen by random draw), skill contests (e.g., essay, photo or other types of contests where entrants submit content that is judged to enter the contest or for additional entries), trip contests and more.

Also available are individual Canadian contest/sweepstakes precedents, including short rules (mini rules), long rules, winner release forms and a Canadian contest law checklist.

For more information and to order see: Canadian Contest Law Forms/Precedents.

********************

For more Canadian advertising/marketing, CASL (anti-spam), competition/antitrust and contest law terms and phrases, see: Advertising Law Terms, CASL Law Terms – A-M, CASL Law Terms – N-Z, Competition Law Terms, Contest Law Terms – A-C, Contest Law Terms – D-H, Contest Law Terms – I-M and Contest Law Terms – T-Z.

********************

The following are Canadian promotional contest / sweepstakes words and phrases from Canadian cases, commentaries and enforcement agencies (e.g., the federal Competition Bureau) (N-S):

“No purchase required entry option” / “alternative means of entry (AMOE)”.

Based on the Canadian federal Criminal Code‘s prohibitions of illegal lotteries under section 206, contest/sweepstakes sponsors in Canada commonly remove either the consideration element by offering a “no purchase necessary” or “alternative means of entry” (AMOE) entry option, chance element (e.g., by adding a skill element, for example making the contest a pure skill skill contest or including a skill-testing question requirement). This is because under many of the illegal lottery offences under section 206 of the Criminal Code, it is a criminal offence to run pure chance games where a purchase or other consideration (i.e., something of value) is required as a condition of entry by contest entrants. Determining what constitutes “consideration” and “chance” can, however, be complex in some case. As such, sponsors who want to require a purchase as a condition of entry into a contest in Canada or not include a skill component should obtain legal advice.

Odds of winning.

Section 74.06 of Canada’s federal Competition Act requires that certain disclosures be made when conducting “any contest, lottery, game of chance or skill, or mixed chance and skill, or otherwise [disposing] of any product or other benefit …” These Competition Act requirements include disclosing “any fact that may materially affect the odds of winning.” Based on these requirements, most contest organizers provide short rules / mini rules in all point-of-purchase materials (i.e., in all print, online and other electronic media) that include, among other things, the odds of winning a prize in the contest. An odds of winning term is also commonly included in the long rules (i.e., official contest rules) of a contest, which are typically linked from the short rules and hosted on an online sub-page. Where winners in a contest are chosen by way of random draw from all eligible entries, the odds of winning are typically stated in contest rules as “odds of winning will depend on number of eligible entries received before contest closes.” For some types of contests, however, such as where the number of potential winners is known (e.g., in seeded prize contests, such as scratch-and-win or instant win contests), the odds of winning a prize should be drafted more precisely. In seeded contests where a specific number of prizes is available to be won, the odds of winning will depend on the number of available prizes among the total number of plays, pieces, etc. (e.g., “odds of winning one in five”, “odds of winning 1/200”, etc.).

“Or otherwise disposes of any product or other benefit by any mode of chance … whatever …”

Under section 206(1) of the Competition Act (promotional contests), certain disclosures are required to be made by contest promoters that “for the purpose of promoting, directly or indirectly, any business interest, conducts any contest, lottery, game of chance or skill, or mixed chance and skill, or otherwise disposes of any product or other benefit by any mode of chance, skill or mixed skill whatever.” In R. v. Sears Canada Inc. (1989), 28 C.P.R. (3d) 248 (Ont. Dist. Ct.), the court interpreted a substantially similar version of this phrase under the former section 37.2(1) of the Act in the context of “mini casino” cards offering a chance to save 10%, 15%, 20% or 25% off Simpsons purchases, without making adequate and fair disclosure of the number of prizes or that 90% of the cards did not include a discount, as follows: “The benefit here was the discount, in the percentage uncovered by the removal of a tab. Chance determined which of the two kinds of cards was received and which tab was removed. The essence of the promotion was therefore the disposal of benefits by a mode of chance. The offence is that Simpsons did not disclose a fact within its knowledge that affected materially the chances of winning.”

Point of sale disclosure.

“Point of sale disclosure” refers to the disclosures for a promotional contest at the point of sale of a product (e.g., on shelf or on package disclosures). Section 74.06 of the Competition Act requires that the following disclosures be made when conducting “any contest, lottery, game of chance or skill, or mixed chance and skill, or otherwise [disposing] of any product or other benefit …”: (i) the number and approximate value of prizes, (ii) the area (or areas) to which they relate (i.e., any regional allocation of prizes) and (iii) any fact that may materially affect the odds of winning a prize. In the Canadian Competition Bureau’s Promotional Contests Enforcement Guidelines, the Bureau states the following with respect to contest disclosures at point of sale:

“Where a manufacturer holds a promotional contest involving specially‑marked packages of its product, the Commissioner is of the opinion that the manufacturer should ensure that proper disclosure of the contest rules is made wherever the specially‑marked packages are sold. Since retailers often do not permit in‑store displays promoting manufacturers’ contests, manufacturers ought to provide a short list of the contest rules on the outside of each package. The consumer should not have to buy the product or tamper with it to read these rules. This short list should contain the following information: (i) the number and value of prizes, (ii) any regional allocation of prizes, (iii) the skill testing question requirement, (iv) details as to the chances of winning (a chart may simplify explanation of the chances), (v) the contest closing date and (vi) any other fact known to the advertiser that materially affects the chances to winning.”

“Prize-pitch”, “prize-promotion”, “gimme gift” or “cheap gift” schemes.

Canadian Anti-Fraud Centre: “One of the most common scams is the “prize pitch”. Consumers are told they have been specially selected to win a prize, or have been awarded one of three or two of five prizes. These prizes usually include cash or a vehicle. You must purchase a product and pay in advance to receive your prize. These products may include “coin collections”, personalized pen sets, etc. The products are generally cheap or overpriced, but may sound valuable over the phone.”

Canadian Department of Justice, Report of the Canada – United States Working Group on Telemarketing Fraud (Updated December 1, 2011): “Telemarketers ‘guarantee’ that the victims have won valuable prizes or gifts, such as vacations or automobiles, but require victims to submit one or more payments for non-existent shipping, taxes, customs or bonding fees, or anything else the offender thinks plausible. Some schemes never provide their victims with any prize or gift, while others provide inexpensive items, often called ‘gimme gifts’ by U.S. telemarketers and ‘cheap gifts’ by Canadian telemarketers.”

RCMP, Prize Pitch (Lottery) Scams: “The classic prize pitch scam involves victims receiving notification by post, phone, or e-mail indicating they have won a prize (monetary or other valued item). However, in order to collect the prize the victim is required to pay various fees or taxes in advance. Victims either never hear from the organization again or receive further requests for money. If you have won a prize in Canada there are no fees or taxes to be paid.”

Promotional contest.

Promotional contests in Canada are largely governed by the federal Competition Act (statutory disclosure and misleading advertising rules), federal Criminal Code (provisions governing “illegal lotteries” that must be avoided), federal and provincial privacy legislation (relating to the collection of entrant personal information), the common law of contract (contests have been held to be contracts) and intellectual property laws (e.g., relating to the transfer of original artistic materials, for example in skill contests, or reproduction of 3^rd party logos, trade-marks or other intellectual property not owned by a contest organizer). In addition, Quebec has a separate regime governing contests, regulated by the Régie des alcools, des courses et des jeux.

With respect to the Competition Act, subsection 74.06 makes it a reviewable (i.e., civil) matter, subject to civil penalties, to operate a contest without certain required disclosure, to unduly delay the award of prizes and also governs the selection of participants and distribution of prizes:

“A person engages in reviewable conduct who, for the purpose of promoting, directly or indirectly, the supply or use of a product, or for the purpose of promoting, directly or indirectly, any business interest, conducts any contest, lottery, game of chance or skill, or mixed chance and skill, or otherwise disposes of any product or other benefit by any mode of chance, skill or mixed chance and skill whatever, where: (a) adequate and fair disclosure is not made of the number and approximate value of the prizes, of the area or areas to which they relate and of any fact within the knowledge of the person that affects materially the chances of winning; (b) distribution of the prizes is unduly delayed; or (c) selection of participants or distribution of prizes is not made on the basis of skill or on a random basis in any area to which prizes have been allocated.”

Random or ‘random draw’ contest.

Contests generally fall into two categories: skill contests (e.g., judged story-writing, photography or other skill competitions) and random contests (e.g., contests where winners are selected by random draw). Random contests can include random draws, seeded games (e.g., where prizes may be found under bottle caps, etc.), scratch-and-win cards, instant win games online or so-called “match and win” games (in which participants collect game pieces for a game, puzzle, etc.).

A “random draw” type of contest is one in which winners are chosen by a random draw from all eligible entries received (as opposed to, for example, a skill contest, where a contest entrant may have to compete with other entrants to win prizes).

B. Pritchard & S. Vogt, Advertising and Marketing Law in Canada, 4^th ed. (Toronto: LexisNexis, 2012): “Contests can be divided into two broad categories: skill contests and contests where prizes are awarded randomly. Until recently, skill contests – where winners are selected by experienced judges based on the contestants’ skill at story-writing, photography, etc. – were much less common. Contests where winners are chosen at random include: sweepstakes where prizes are awarded by random draw; seeded games (including Coke’s ‘under the bottle cap’ promotions and Tim Hortons’ ‘Roll Up The Rim To Win’), where prizes are randomly seeded on game cards or on-pack, and participants must scratch, unpeel or otherwise reveal the prize area to discover whether they have won a prize; online instant win games where consumers enter a code number (usually obtained on-pack); and ‘match and win’ games where participants must collect game pieces to spell specific words or match the pieces of a puzzle.”

Regional allocation.

Section 74.06 of the Competition Act requires that “fair and adequate” disclosure be made of the following information when conducting “any contest, lottery, game of chance or skill, or mixed chance and skill, or otherwise [disposing] of any product or other benefit …”: (i) the number and approximate value of prizes, (ii) the area (or areas) to which they relate (i.e., any regional allocation of prizes) and (iii) any fact that may materially affect the odds of winning a prize. With respect to regional allocation of prizes, while contest sponsors can generally determine where their prizes will be awarded, any geographic allocation of prizes is usually disclosed in the short and long contest rules (e.g., if a particular number of prizes are available in specified provinces or other regions only).

Release form.

A “release form“ or “winner release form” is commonly one of several documents used for the operation of promotional contests in Canada (and other countries), together with short rules or “mini rules” (mandatory point-of-purchase disclosure) and long rules (containing the more detailed entry and eligibility requirements for the contest). A winner release form commonly includes information about the winner (e.g., name, age and contact information), an agreement to comply with the contest rules and also agreeing to allow the contest sponsor, among other things, to use the winner’s personal information for marketing. Release forms in contests are generally more important where there is more potential risk associated with the prize (e.g., in trip contests) or where there are higher value prizes. Also, for promotional contests that involve the creation of original material by entrants (e.g., skill contests involving the submission of original artwork, photographs, videos or other entrant generated content), release forms typically include provisions for the transfer of intellectual property rights to the contest sponsor and rights for the sponsor to use the original materials in marketing.

“Short rules” or “mini rules”.

Canada’s federal Competition Act requires that certain disclosures be made when conducting “any contest, lottery, game of chance or skill, or mixed chance and skill, or otherwise [disposing] of any product or other benefit …” Key Competition Act requirements include: (i) disclosing the number and approximate value of prizes, (ii) disclosing the area (or areas) to which they relate and (iii) any fact that may materially affect the odds of winning. The Competition Act also prohibits contest organizers from “unduly delaying” the award of prizes. Based on these requirements, most contest organizers provide short rules / mini-rules in all point-of-purchase materials regardless of media (i.e., in all print, online and other electronic media), with long rules (i.e., official contest rules) available on request and commonly posted on the sponsor’s website. Point-of-purchase disclosure (short rules) commonly includes both the required statutory disclosure and other key contest elements. While short, and usually straightforward, it is important that the mandatory statutory disclosure be drafted precisely and correctly. It is also important that the timing for the launch of a contest and accompanying promotional materials ensure that the necessary disclosure is included in point-of-purchase and similar marketing materials where entrants first see a contest promoted.

Skill.

R. v. Robert Simpson (Regina) Ltd., 1958 CarswellSask 66, 121 C.C.C. 39 (Sask. C.A.), at para 30, per Gordon J.A.: “The meaning which I think should be assigned to the word [skill] as used in the [Criminal Code] is as follows: ‘Capable of accomplishing something with precision and certainty; practical knowledge in combination with ability; cleverness and expertness.”

[Skill cannot be a mere sham for what is an actual lottery]: Brown v. Bonnycastle, [1936] 1 D.L.R. 295, 65 Can C.C. 57, 43 Man. R. 476: “One is at a loss to understand how it can be considered that a competition which, to be legal under the subsection, must depend on skill or judgment on the part of the competitor, can be based on a study or comparison of 10,000 signatures, which are automatically written, and in which no skill or judgment, solely referable to and evoked by the competition, is exercised. ‘Skill or judgment’ carry their on connotation, being the Court’s formula for drawing a dividing line between what is and what is not a lottery. It is, therefore, clear that the words do not permit of evasion by subterfuge and that skill or judgment must be called for by the competition and exist in an active and subjective sense.”

R. v. Wallace (1954), 109 C.C.C. 351 (Alta S.C.), per Ford J.A., citing Roe v. The King [1949], 2 D.L.R. 785 at p. 789 (S.C.C.): “The case of Roe v. The King, supra (known as the Red River Barrel case), was also referred to. It was held that it required an element of skill to estimate the time that a 45-gallon capacity barrel would take to float the distance of 105 miles from Emerson to the Norwood Bridge in Winnipeg and surely that is so. Everyone who purchased a ticket was entitled to compete.”

Michael d. Lipton, et al., “Games of Skill and Chance in Canada”, Gaming Law Review, Volume 9, Number 1, 2005: “In the case of R. v. Quiz It Trivia Inc., [1989] O.J. No. 3050 (Ont. Prov. Ct.) … [t]he court considered several cases for the primary purposes of defining the terms ‘skill’ and ‘chance.’ As adopted by the Supreme Court of Canada in Ross v. The Queen, [1968] 70 D.L.R. (2d) 606, 617-20 (S.C.C.). Reference was made therein to several decisions that employed various definitions of skill, which are found in an English dictionary. The preferred definition adopted therein was one used ty the Saskatchewan Court of Appeal in the matter of The Queen v. Robert Simpson (Regina) Ltd., [1958] 121 C.C.C. 39 (Sask. C.A.), which is drawn from the New Oxford Dictionary as follows: ‘capable of accomplishing something with precision and certainty; cleverness and expertise.’”

Skill contest / game of skill.

A type of contest in which winners are chosen by skill not chance. In Canada, illegal lottery offences under the federal Criminal Code prohibit, among other things, awarding property by chance or awarding goods, wares or merchandise by chance or mixed skill and chance, where entrants pay to play (or provide other valuable consideration). As such, pure skill contests can be one way to include a purchase requirement for a promotion without violating the Criminal Code.

U.S. Federal Trade Commission: “Skill contests [are] puzzles, games or other contests in which prizes are awarded based on skill, knowledge or talent – not on chance. Contestants might be required to write a jingle, solve a puzzle or answer questions correctly to win.”

R. v. Ross, [1968] S.C.R. 786, at para 13: “Among dictionary definitions, the following appear to be of some interest: Funk & Wagnalls New Standard Dictionary: ‘The expression games of chance is used to describe those contests the outcome of which is largely governed by chance, as in cards, dice and gambling games generally; and in opposition to games of skill the result of which depends largely upon the dexterity of the contestant.’ Bouvier’s Law Dictionary. Vo Gaming: ‘There are some games which depend altogether upon skill, others which depend upon chance, and others which are of a mixed nature. Billiards is an example of the first; lottery, of the second; and backgammon, of the last’”.

R. v. Johnson (1902), 6 Can. C.C. 48, 14 Man. R. 27 (Man. K.B.), as summarized by the court in R. v. Robert Simpson (Regina) Ltd., 1958 CarswellSask 66, 121 C.C.C. 39 (Sask. C.A.), at para 14: “The judgment of the Court [in R. v. Johnson] was delivered by Killam C.J., who stated that the modus operandi advertised and practised was that each purchaser from the accused of goods to a certain amount was given a ticket and upon drawing by chance among the holders of such tickets the winner was to get the horse, buggy and harness if he should shoot a turkey at a distance of 50 yds. In 5 shots. It was stated in the case that the evidence showed that any person could easily shoot the turkey under the circumstances; in other words, that no skill was required. In giving judgment Killam C.J. stated it was a question for the jury whether the interposition of the shooting was intended as a real contest or as a device for covering up a scheme to dispose of the property by lot and upon the evidence the jury was justified in finding as they did.”

Skill testing question.

Skill testing questions are commonly included in promotional contests in Canada in an effort to remove the chance element from a contest. This is because at common law, illegal lotteries were generally defined as consisting of three elements: (i) chance, (ii) consideration (i.e., typically a cash entry requirement) and (iii) a prize (which offences have been codified in the Federal Criminal Code). As such, based on these illegal lotteries offences, many contest organizers will often elect to remove either the consideration element (e.g., by offering a “no purchase necessary” entry option), chance element (e.g., including a mathematical skill testing question requirement to win or making a contest entirely a skill-based promotion), or both.

Michael d. Lipton, et al., “Games of Skill and Chance in Canada”, Gaming Law Review, Volume 9, Number 1, 2005: “Activities relating to contests and games of chance with no appreciable skill component are offenses under sections 206(1)(a), (b), (c) and (d) of the [Criminal Code]. The case law provides little guidance as to what physical or mental feats constitute a viable skill component. For this reason, contest organizers usually require entrants to answer a mathematical skill-testing question before claiming any prizes; this insulates the contest from sections 206(1)(a), (b), (c) and (d) of the [Criminal Code] by transforming it into a game of mixed sill and chance … Case law supports the notion that the addition of such a question transforms a game of pure chance into one of ‘mixed skill and chance’. … The traditional use of a four-part mathematical skill-testing question as the basis for immunizing games from sections 206(1)(a), (b), (c) or (d) of the [Criminal Code] derives from the Canada Trust Company case, a decision of the Alberta Provincial Court. The acceptable level of difficulty that such a mathematical question should present in order to constitute a true test of skill has not been tested by case law. The question approved in the Canada Trust Company case was: Step 1: multiply 228 times 21; Step 2: add 10,824 to the answer from Step 1; Step 3: divide the answer from Step 2 by 12; and Step 4: subtract 1121 from the answer to Step 3. In contrast to the above, many skill-testing questions used in Canada today have dropped several digits, leading to questions such as ‘5 x 10 x 2 – 10 = ?’ Whether that comprises a sufficient test of skill remains to be seen. Those who wish to proceed prudently stay with questions involving double or triple digit numbers.”

So … disposed of.

In Roe v. The King, [1949] S.C.R. 652, 94 C.C.C. 273, [1949] 2 D.L.R. 785, the Supreme Court of Canada held that the phrase “so … disposed of” under section 236(1)(c) of the former Criminal Code, 1932, c. 8, s. 1 refers “to the scheme indicated in the preceding subsections, that is, ‘by some mode of chance’. If there is merely skill or a mixed element of skill and chance, there is no offence.” The current section 206(1)(d) of the Criminal Code, which is one of the illegal lottery offences under section 206(1) of the Code, also does not include the term “chance” but rather refers to property “so … disposed of” in connection with “any scheme, contrivance or operation of any kind for the purpose of determining who, or the holders of what lots, tickets, numbers or chances, are the winners of any property …” Canadian courts have generally held that all of subsections 206(1)(a)-(d) of the Criminal Code require that it be proven that winners are selected by pure chance and not, for example, mixed chance and skill or pure skill.

Survey contest.

Survey contests are where a company or other organization conducts a survey (e.g., for market information or about a new product or service) and runs a promotional contest in conjunction with the survey. Contests run in connection with surveys are sometimes referred to as an “incentive” to participate in the survey. While it is generally acceptable to require contest entrants to answer some survey questions as one term of a contest, there is a potential illegal lottery consideration related risk if a survey is too extensive or onerous (i.e., significant effort by contest entrants could be construed to mean that consideration is required to enter the contest, raising illegal lottery issues under section 206(1) of the Criminal Code). Contests run in conjunction with industry or other surveys are generally subject to the same laws that apply to promotional contests in Canada generally.

Sweepstakes.

“Sweepstakes” is another term for a promotional contest or giveaway. In Canada, there is no legal distinction between using the terms “contest”, “promotional contest”, “giveaway” or “sweepstakes” to refer to promotional contests where prizes are awarded by way of random draw or skill with a no purchase entry option and, for random draw contests, a skill-testing question. Private parties cannot, however, generally run lotteries in Canada (i.e., where a purchase is required to enter or obtain a ticket or ballot to win a prize), unless a provincial license has been obtained to run a charitable lottery. For more information, see: Contest Laws In Canada. For rules and precedents to run promotional giveaways in Canada (i.e., contests/sweepstakes), see: Canadian Contest Rules and Forms.

Sweepstakes scam.

Canadian Anti-Fraud Centre: “After entering a fake sweepstakes contest in the mail, you will receive a call within two to four weeks from a fraudulent telemarketer. This person will usually identify themselves as a lawyer, judge, customs agent or other official. They will represent themselves as an agent for a particular company. You will be told that you have won a large cash award, but money must be sent up front for taxes, etc.”

Swipe-and-win contest.

A “swipe-and-win” contest is a type of automatic entry contest where a contest entrant is immediately entered into the contest without, for example, having to take any further steps to participate, such as by entering their information in an entry ballot, creating something such as a photograph or essay in a skill-based contest, sharing information on social media about the contest to enter or other complying with other contest terms or calls to action. Some other examples of automatic entry contests include where a scratch and win prize winner is automatically entered into a contest in addition to the other prize that they won or by participating in an industry survey, participants are entered into a contest that is used as an incentive for participating in the survey.

********************

CANADIAN CONTEST & ADVERTISING LAW SERVICES

We are a Toronto based competition and advertising law firm that offers business and individual clients efficient and strategic advice in relation to Canadian competition and advertising laws, including contests/sweepstakes and other types of promotions. Our experience includes advising Canadian and U.S. clients in relation to Canadian contest/sweepstakes, advertising/marketing and competition/antitrust laws.

For more about our contest/advertising law services see: here

To contact us for Canadian contest or advertising law advice see: here

For more information about our firm, visit our website: Competitionlawyer.ca

Contest Law Terms – N-S