Instagram and other social media contests are a common way to gain new followers, attract potential customers and engage with an online audience. But, if run improperly, contests can have serious consequences for the individuals or corporations who organize them.
Contests in Canada, including ones on Instagram, Facebook or other social media, are largely regulated by the Competition Act (the “Act”). The Act describes the requirements and consequences for failure to comply for different types of contests, including lotteries and games of chance or skill.
A lottery is a form of gambling that requires (a) consideration (for example, the contestant has to buy something, such as a ticket), (b) chance and (c) a prize. In Canada, lotteries are regulated by the Act, as well as the Criminal Code and provincial legislation. Administering a lottery is complex and usually not appropriate for promotion contests on social media. Businesses should be aware that any promotional contest that requires consideration from an entrant may be considered a lottery and attract criminal liability.
Games of Skill or Chance
Promotional contests are usually designed as a game of skill or a game of chance. A game of skill is a campaign in which effort, skill or merit is required to win a prize. For example, a business may run an Instagram contest where entrants are required to caption a photo, with the best caption winning a prize. The winner is determined by voting or other judging criteria, and the element of chance does not exist.
A game of chance is a campaign in which entrants can win a prize based purely on chance. For example, a business may ask entrants to tag two friends on a post and the winner of a prize will be randomly selected.
Purchase, payment or other consideration as a requirement to enter games of skill or chance is generally prohibited.
If you are operating a promotional contest, you must comply with the Act’s disclosure requirements.
Section 74.06 of the Act requires contest organizers to provide adequate and fair disclosure in a reasonably conspicuous manner to the potential contest entrant (for example, contained within the social media post) of the following:
- the number and approximate value of prizes;
- any regional allocation of prizes; and
- any fact within the knowledge of the advertiser that materially affects the chances of winning (such as the mechanics of the contest and the odds of winning a prize).
The Act stipulates that the distribution of prizes cannot be unduly delayed. It is also recommended that a full version of the contest rules be made available on the contest organizer’s website or upon request.
Full contest rules should include:
- contact information of the contest organizer;
- how to participate;
- rules of participation (e.g. a person may enter the contest as many times as he or she would like);
- eligibility to win (e.g. an entrant’s profile must be public not private);
- how to win (i.e. skill or random draw);
- no purchase necessary clause;
- prize to be won;
- distribution of prizes;
- expiration of contest;
- when the winner will be selected;
- any copyright or moral rights issues; and
- any conditions.
In addition to the legislative requirements described above, organizing an Instagram contest also requires compliance with Instagram’s Promotion Guidelines. Similar guidelines exist for other social media platforms.
Failure to Comply
Failure to comply with the Act can lead to an order that the contest organizer stop administering contests, publish a corrective notice and/or pay a significant financial penalty. Financial penalties can be ordered in an amount up to $750,000 in the case of a first-time occurrence by an individual and $10 million in the case of a first-time occurrence by a corporation. For subsequent orders, the penalties increase to a maximum of $1 million in the case of an individual and $15 million in the case of a corporation.
The laws governing contests in Canada are complex and include significant penalties for non-compliance. Should you require any legal advice with respect to running contests in Canada, our team of lawyers can answer questions and help your organization properly administer promotional contests, including social media contests.
Note: This article is of a general nature only and is not exhaustive of all possible legal rights or remedies. In addition, laws may change over time and should be interpreted only in the context of particular circumstances such that these materials are not intended to be relied upon or taken as legal advice or opinion. Readers should consult a legal professional for specific advice in any particular situation.