Demystifying contest laws in Canada

This article was updated on November 14, 2023, to reflect the repeal of Québec's publicity contest laws.

This article provides an overview of contest regulation in Canada, including the relevant legal frameworks and primary considerations surrounding each. If you are involved in organizing contests or promotional activities in Canada, it is important to understand and comply with these laws in order to mitigate risk and avoid potential liabilities.

There are many legal requirements that apply to running a contest in Canada. In particular, sponsors will need to ensure that their contest complies with the following pieces of legislation:

• The federal Criminal Code;
• The federal Competition Act; and,
• Québec's Charter of the French Language, as applicable.

In addition, sponsors will need to ensure that their contest complies with other legal requirements and guidelines relevant to their contest's particular mechanics—for example, privacy laws, intellectual property laws, social media platform terms, influencer disclosure guidelines, etc.

We explore each of these legal requirements in greater detail below.

The Criminal Code

The Canadian Criminal Code prohibits various forms of betting, including contests that require participants to pay, make a purchase or provide other valuable consideration as a condition for entry or winning. To avoid being classified as an illegal lottery, contests must incorporate an element of skill and not require payment or valuable consideration, with limited exceptions. Understanding the following will help you ensure compliance and prevent criminal offenses:

• The requirement for an element of skill

Contests often employ a mathematical "skill-testing question" to introduce a skill component, ensuring compliance with the Criminal Code. The question must be answered correctly by potential winners before they can receive any prizes. Typically, a mathematical question consisting of four parts and that follows the order of operations (i.e., BEDMAS) is used, in keeping with what Canadian courts have historically deemed acceptable. The question should have a reasonable level of difficulty and require an answer without mechanical or other aid. By following the proper order of mathematical operations and avoiding inconsistencies, you can ensure a legally sound skill-testing question.

• The "No Purchase Necessary" ("NPN") rule

The Criminal Code generally prohibits giving away prizes in games of chance, or mixed chance and skill, when participants must pay money or provide valuable consideration to enter. It is essential to offer an alternate "no purchase necessary" method of entry and uphold the principle of "equal integrity," when a "pay-to-play" component exists. This principle ensures that all participants, regardless of their method of entry, have an equal chance of winning.

To comply with equal integrity requirements, participants who choose the NPN option should not be disadvantaged compared to those who pay to participate (for example, NPN participants should be able to receive the same number of entries as purchase participants). Typically, an alternative NPN method of entry is offered in the form of an essay "mail-in" method of entry, which allows for an entrant to submit a short (50 word) essay on a topic to a designated address by mail in exchange for an entry.

The Competition Act

The federal Competition Act regulates contests held for the purpose of promoting business interests or the sale of products and services in Canada. To ensure compliance, consider the following key requirements:

• Adequate and fair disclosure of prize details

Contest materials and rules should provide clear and transparent information about the number of prizes available to be won. The approximate retail value of each prize must also be disclosed. A detailed description of each prize should be included as well (using brand names and model numbers, if possible, with appropriate consent). Ensure that any items associated with the prize but not included as part of it are expressly excluded.

• Disclosure of regional prizes and other material facts

If prizes are allocated on a regional or other basis, clearly disclose this information and provide details about the regional allocation. Additionally, disclose the odds of winning each prize and any other known factors that may materially affect the chances of winning. Ensure that the distribution of prizes is not unduly delayed, and prizes are awarded in a timely manner.

• Comprehensive disclosure on packaging and promotional materials

The Competition Act requires that all packaging, advertising and other promotional materials relating to the contest include disclosures of the number and approximate value of available prizes, of any regional allocation of the prizes and of any other fact that materially affects the chances of winning. These disclosures should be made in a reasonably conspicuous manner before potential entrants are inconvenienced or committed to the contest. It's important that contest sponsors also conform with other applicable laws, such as the Criminal Code, when making the required disclosures.

Disclosure requirements are typically met by including contest "mini rules" within contest-related promotional materials. While the exact wording needed to meet disclosure requirements will vary depending on the nature and specifics of each contest, the most common elements found in mini rules are:

1. the number and value of prizes;
2. any regional allocation of prizes;
3. the skill testing question requirement;
4. details as to the chances of winning;
5. the contest closing date/time/time zone;
6. a "no purchase necessary" statement; and;
7. a hyperlink that directs to the full rules.

Québec considerations

Québec's Charter of the French Language (the "Charter") has mandated French as "the official language" of commerce and business in the province of Québec and imposes various obligations on entities doing business in the province, which notably requires that certain documentation as well as advertising be translated to French. Contest sponsors that are subject to the Charter must therefore ensure that contest rules and promotional materials are available in French. Participants in Quebec must have the possibility to complete the registration process in French. This ensures that French-speaking Quebecers have full access to contest information and can engage without language barriers. Non-compliance with the Charter may result in significant fines for businesses, starting at up to $30,000 for the first offence, and escalating to double for the second offence, and triple for subsequent offences.

Until recently, Quebec also had a legal regime specific to contests – which required amongst other things that contests be filed with the provincial regulator, that contest sponsors pay duty on the value of prizes awarded, and that the regulator's consent be obtained prior to making changes to a contest post-launch. As of October 27, 2023, however, this legal regime was abolished.

Further contest requirements

In addition to the rules discussed above, sponsors will need to ensure that their contest complies with other legal requirements and guidelines that may apply depending on the particular mechanics of the contest. To ensure compliance, consider the following requirements:

1. Privacy laws: Contests in Canada must comply with applicable privacy laws. Notably, contest-related email advertising, as well as any "opt-in" to receive marketing emails from the sponsor included within a contest entry form, must be compliant with Canada's Anti-Spam Law ("CASL").
2. Intellectual property laws: To the extent that a contest uses a particular campaign name or prize name, it's important to ensure that there are no issues regarding third party trademarks. When in doubt, use of generic terminology will help to limit legal risk. Where a contest requires the submission and/or use of participant content, ensure that the contest rules incorporate appropriate licensing language and safeguards to help ensure that only compliant content is submitted.
3. Social media platform terms: Social media platform terms of use typically include requirements for hosting or advertising contests through the particular platform. Some platforms also prohibit certain contest-related activities. Before launching a contest on social media, ensure the applicable terms are reviewed for compliance.
4. "Material Connection" disclosures: Canada's advertising industry guidance and Competition Act guidance include rules for disclosing "material connections" in advertising (for example, using #Ad on social media). For contests that require participants to publicly post or engage in similar promotional activities to enter, the fact that their promotion is incentivized by earning a contest entry must be clearly disclosed (for example, by including #ContestEntry on social media).
5. Minors: Note that a minor in Canada may be anyone under 18 or 19 years of age, depending on the particular province or territory. Generally, if a contest is open to participation by minors, they should only be permitted to participate on condition of having received parent/legal guardian consent and should not be permitted to participate if the prizing is restricted to use by adults.

While this article provides a general overview of the legal framework surrounding contests in Canada, it's important to seek legal advice from professionals experienced in this area of law. Please contact the authors for more information.