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It’s common for businesses to engage in trade promotion, which is a way to promote the goods or services your business offers.
Promotions are often used to attract the attention of current and potentially new customers. However, it’s vital to ensure this is being done legally. When looking to engage in trade promotions, it important to factor in these considerations:
- The kind of contest being hosted
- The prizes and their value
- Whether a trade promotion permit is required
- Relevant fees
- Legal documentation, such as Terms & Conditions or Privacy Policies
It is advisable to have all the arrangements regarding the above sorted before engaging in trade promotions.
What Is Trade Promotion?
A trade promotion is a competition created by businesses as a marketing tool to further promote their products or services. The trade promotion allows members of the public to enter into a competition for free and, if they are selected, they win a prize.
| Example A professional photographer asks their social media followers to comment and tag another account in order to be automatically entered into their draw to win a free, self portrait session. This counts as engaging in competition, and therefore attracts certain legal requirements. |
Trade promotions must meet the following criteria:
- The business hosting the competition must have an Australian Business number (ABN) or an Australian Company Number (ACN)
- The purpose of the competition must be to promote the businesses goods and services
- Entry should be free
- Anyone can participate as long as they are not part of the promotion or benefiting from it (If there is an age limit to the contest, then people under the required age cannot enter)
Types Of Competitions
There are two types of trade promotions. They are known as games of skill and games of chance.
Games Of Skill
A game of skill requires participants of the competition to complete a task in order to gain entry. Games of skill can require people to submit something, write a submission, create a work or fill out a survey.
It can range from a larger task to something small that only takes a few minutes – as long as it requires people to do something, it will be considered a game of skill.
| Example A business that specialises in selling children’s stationery hosts a promotion for all the schools in their local district. In order to enter, students must submit a short story. The best stories from each grade are then selected to win a hamper filled with the businesses stationary. |
Games Of Chance
Games of chance don’t require people to display a skill or make any additional effort to enter into the competition. In games of chance, entrants are not judged for a submission, but rather, selected without any conscious choice. Winners are selected by pure luck.
| Example An online newsletter hosts a promotion for their current and new subscribers to win tickets for the first NRL game of the season. Current subscribers are automatically entered and new subscribers are entered when they sign up for the newsletter by providing their email address. The winner is then selected at random from the pool of names. |
So if it sounds like you’re running a game of chance, then you’ll need to Apply For A Trade Promotion Gaming Authority or ‘Trade Promotion Permit’ as explained below.
How To Run A Trade Promotion Lottery In NSW
Trade promotions need to meet certain legal standards in NSW. These will be different for each state.
In this article, we’ll be covering the rules of NSW, so if you’re looking to run a trade promotion in a different state, be sure to check out the regulations that apply to you.
The Prize
There are restrictions on the kind of prize that can be given. The prize resulting from a trade promotion must not be:
- A smoking product
- Firearm
- Cosmetic procedures
- Alcohol that breaches the content limitations
- Anything else that is considered illegal
It’s important to note that the Community Gaming Regulation 2020 lists more specific restrictions for certain types of prizes. For example, section 39 provides that if the prize is alcohol, it cannot exceed 20 litres and cannot contain more than 20% of alcohol volume.
More detail regarding the prohibitions on prizes can be found on the NSW Fair Trading Website.
Applying For Authority
Authority refers to the permit required to organise a trade promotion event.
In NSW, a permit is required for promotions with a prize or prizes worth $10,000 or more.
There is no minimum or maximum value for the prizes that can be awarded to winners. If the value of your prizes does not exceed the amount of $10,000, then you are not required to apply for a trade promotion permit.
How Do I Get A Trade Promotion Permit?
An application can be done online. The application form will ask for details reading the organisation or individuals details, the promotion itself and anything else that is relevant.
Ensure you have all this information ready prior to starting the application. It’s also important to keep in mind that you will be required to pay a fee as part of completing the application.
The amount will depend on the application itself – there’s more detail on that below.
How Does A Trade Promotion Permit Work?
The permit will allow you to run promotional trades for the amount of years you have applied for.
In this time, you can host multiple trades without actually having to reapply constantly. Obtaining a trade promotion does not mean your business can now go ahead and start organising trade promotions just yet.
For each trade promotion, the terms and conditions for the promotion will need to be submitted to the website no less than 10 days before the event is to start.
What Fees Do I Need To Pay?
As stated previously, the fees for a trade promotion permit depend on the application itself. An application can be made for a permit that lasts one, three or five years and it’s cheaper if you lodge it online due to a 10% processing discount. We’ve summarised it for you here:
| Years | Online Application Total Fee Amount |
| One | $393 |
| Three | $606 |
| Five | $819 |
For more information, visit the NSW Fair Trading Website. Information and prices can be subject to change, so it’s always important to check the source directly.
What Else Do I Need?
Whether you require a trade promotion permit or not, all businesses looking to take part in trade promotions need to consider their legal documentation and regulatory requirements.
Australian Consumer Law and the Privacy Act 1988 require certain practices from businesses that collect information from their customers. Therefore, it’s vital to ensure your business complies with every relevant regulation.
Additionally, make sure to be aware that there are certain advertising standards relating to how you can advertise your trade promotion. This includes not:
- Depicting a breach of the law;
- Depicting children participating in the gaming activity;
- Suggesting that winning the promotion will be guaranteed merely because they enter or participate the competition; or
- Suggesting that entering or participating will guarantee an improvement of their financial situation.
If you’re found to be in breach of these advertising rules, you can be fined up to $5,324 as at the time of writing this article.
Competition Terms And Conditions
The Terms & Conditions (T&Cs) of the competition not only need to be submitted online, but it is also the main document that will clarify matters regarding the contest.
Usually, Competition T&Cs include:
- The process regarding potential disputes
- Relevant opening and closing dates for the contest
- The prizes being offered
- The monetary value of the prizes
- How the winner will be decided
- When the winner is decided
- Eligibility criteria for the participants
- The timeframe a winner has to collect their prize
- What happens when a winner does not come forward
This list is non-exhaustive as each business will have its unique needs. As such, your Competition T&Cs should be tailored to your requirements to ensure all your legal grounds are covered. It’s wise to chat with a lawyer with this so that you don’t miss any key matters.
Privacy Policy
Running a contest requires collecting the personal information of all participants such as their names, emails, phone numbers and home addresses. In accordance with the Privacy Act 1988, any business that collects people’s personal information is required to have a privacy policy.
A Privacy Policy clarifies the purpose, intentions and storage of the data being collected and also promotes greater transparency between businesses with their clients.
Our privacy lawyers have high levels of experience as well knowledge in this area and are happy to chat to you about any privacy policies you may require.
Need Help Operating A Competition?
While running a trade promotion can be a fun and interactive way to engage with your customers, there are a few legal considerations when running a trade promotion. If done successfully, it can be a great way to market your business to the greater public.
It’s vital to make sure that it is compliant with the law, to avoid any trouble along the way.
Deciding whether you need a permit, having an iron clad Privacy Policy and T&Cs can provide the necessary legal protection to carry on with business matters.
If you would like a consultation regarding trade promotions, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.
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