A trade promotion is an activity conducted for the promotion of trade, a business or the sale of goods and services.
Trade promotions include competitions, sweepstakes, contests and giveaways and are a popular way of marketing direct selling businesses and their products.
A trade promotion falls typically into one of two categories:
- a game of skill, in which the winner is determined wholly by skill. For example, requiring each entrant to “describe your dream holiday in 25 words or less”. The entrant who submits the most creative response wins; or
- a game of chance, in which winners are determined wholly or partly by chance (for example, a draw).
A promotion must be conducted in accordance with the laws of those States and Territories in which it is being conducted, that is, each jurisdiction whose residents can enter the trade promotion. The legal requirements concerning the conduct of a trade promotion differ across all Australian jurisdictions.
Other areas of Australian law, for example, consumer protection law and advertising law (including applicable advertising codes), also apply to trade promotions, irrespective of whether the trade promotion constitutes a game of skill or a game of chance.
There are several issues which must be taken into account when planning a trade promotion.
Failure to address these issues can result in, for example:
- lengthy delays and engagement with gambling regulators prior to the issue of a permit for the promotion in certain jurisdictions;
- for failing to conduct the trade promotion in accordance with applicable laws, enforcement action;
- unwanted scrutiny from consumer protection authorities;
- where the promoter is dependent on a third party in respect of any aspect of the trade promotion, for example, a prize supplier or a social media platform, damage to the relationship between the promoter and this third party; and
- from a public relations perspective, damage to the reputation and image of the promoter, and more importantly, the promoter’s brand.
Checklist for Promoters
While trade promotions may appear to be a simple and cost effective way to promote goods and services associated with a direct selling business, direct selling businesses should be mindful of the legal issues which may arise and should apply the same level of care as they would apply when undertaking any other significant marketing or promotional activities to ensure compliance with the law.
To assist, we have prepared a flowchart anbd checklist to help in identifying and addressing these issues. For a copy of the flowchart and checklist, please contact a member of Addisons’ Direct Selling Team.
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