Last updated: 24 January 2023
Competitions and contests are a great way to boost sales, reward your loyal customers and hype your business. But before you decide whether to run a competition or contest, you need to understand the legal restrictions.
Contests in Australia are divided into ‘games of chance’ and ‘games of skill’. A ‘game of chance’ is one where the winner is chosen randomly, also known as a lottery. A ‘game of skill’ is one where the winner is chosen based on the judging of a competition entry.
Generally, ‘games of chance’ require permits, but ‘games of skill’ do not.
So if you want to avoid the hassle of applying for a permit you’re better off running a ‘game of skill’ type competition. But be aware, even if your competition is a ‘game of skill’, it will still be deemed to be a ‘game of chance’ requiring a permit if your contest uses any kind of random draw.
Once you’ve decided on your contest type, stick to these guidelines:
1. Check the rules for each State. The permit requirements vary by State in Australia and can depend on the value of the prize. For example, if you are running a lottery in NSW you need a permit. But the same lottery in Victoria would only need a permit if the prizes were over $5,000. So always check the regulations for the particular States where you plan to run your contest.
2. That includes whether people have to pay to enter. Generally, you are allowed to require people to purchase a particular product in order to enter your contest. However, there are some States that require entry to be free or put limits on charging entry fees such as telephone call charges, mobile fees or similar.
3. Online competitions are subject to the same rules. Online businesses running competitions often believe that there is no permit requirement, as long as the prize money or value of the prize is below a certain limit. This is not correct. Online competitions are subject to the same rules.
4. The contest should be fair. Consumer Law requires that your competition be fair and not misleading. For example, you can’t run a contest where the winners only win a chance to enter another competition.
5. You need to honour your promises. Consumer Law also requires you to honour the prizes you say you are offering and they must match the value and description you advertise.
6. The contest should not breach public interest. Victoria and other States will not allow a competition that promotes things that may be considered contrary to the public interest. For example, prizes to drink excessive amounts of alcohol or promoting dangerous behaviour such as filming others doing dangerous stunts.
So make sure you are aware of the legal restrictions and requirements in each State before you run your competition or contest – after all, you don’t want your contest to get shut down because of a technicality!
For more detailed information, check out our feature article: How to Run a Competition or Trade Promotion in Australia.