Gift with Purchase Promotion regulations

Limited gift with purchases and first entries received

In certain circumstances some of the lottery departments treat limited gift with purchases and first entries received promotions as requiring permits.

(a) An example of a limited gift with purchase promotion is as follows:

Purchase a Coca-Cola and receive a cap in store – there are only 100 caps available.

(b) An example of a first entries received promotion is as follows:

Purchase a Coca-Cola and be one of the first 100 to send in your entry form by mail to receive a cap.

For the purpose of the following I have assumed that the total value of gifts/prizes exceeds $5,000, as this value means that a permit may be required in Victoria, South Australia and Northern Territory.

Please also note that if there is a chance that you may receive one of two different prizes/gifts then this will be considered by most departments as a game of chance, and permits will generally be required. This is because there is an element of chance as to whether you receive the cap or the football.

An example:

Purchase a Coca-Cola and receive a cap or footballs in store – there are only 100 caps and 100 footballs available.

Why obtain permits – can I simply advertise the offer as while stocks last?

Bait Advertising And Misleading And Deceptive Conduct

Schedule 2 - Section 35 of the Competition and Consumer Act ('the CCA') deals with conduct that amounts to what is called 'bait advertising'. While I will generally refer to the Australian Competition and Consumer Commission ('the ACCC') and the CCA, as you would know, there are similar provisions in the various State and Territory fair trading laws. In addition, the ASIC Act has a similar bait advertising provision. For the purpose of this advice, I will simply refer to the ACCC and the CCA.

Section 35 (1) of the CCA is detailed below:

(1) A person must not, in trade or commerce, advertise for supply at a specified price, goods or services if:

(a) there are reasonable grounds for believing that the person will not be able to offer for supply those goods or services at that price for a period that is, and in quantities that are, reasonable having regard to:

(1) the nature of the market in which the person carries on business; and

(2) the nature of the advertisement; and

(b) the person is aware or ought to be aware of those grounds.

In some circumstances, a particular limited offer may not be caught by the operation of the bait advertising provisions, in the CCA, as there may be no payment made in connection with the offer. As can be seen from the above section, there is the requirement that the goods or services be advertised at a specified price.

Example A.

Company A wants to encourage people to join a new Company A club, so it can market its goods and services to people who join. To do this, Company A offers a Company A branded t-shirt. There are only 50 t-shirts available. Research conducted by Company A indicates that it will run out of t-shirts on the 2nd day of the promotional period. The offer is communicated in a newspaper on the 1st of June 2009. The consumer has to fill in a claim form, that is available in the newspaper, and then post it in. The offer is advertised as follows:

Join Company A Club and receive your bonus Company A t-shirt*.

*Promotion ends last mail received on 30.06.09, or while promotional t-shirts last, whichever is earlier

In this example there is no purchase required, so technically would not be caught by the operation of section 35. So, even if the t-shirts were to run out on the 2nd day of the promotional period, Company A could strongly argue that the offer does not breach the bait advertising provisions as there are no goods or services offered at a specified price.

Despite the above, the ACCC may argue that the offer is misleading and deceptive, insofar as Company A knowingly advertised an offer where it knew that it would have an insufficient supply of t-shirts to meet expected demand. Company A encouraged people to join the club on the understanding that they would receive a t-shirt, when in fact there was a very low chance of receiving the same. Accordingly, the ACCC could claim that the offer breaches section 18 of the CCA (i.e. its actions amount to misleading and deceptive conduct).

While Stocks Last And Similar Conditions

• Promotion ends last mail received on 30.06.09, or while promotional t- shirts last, whichever is earlier.

Similar types of limitations that are often placed on offers include the following:

• Offer is only open for strictly limited time.

• Only available while stocks last.

The ACCC has clearly indicated, in various materials that it has released, that the inclusion of such a condition for an offer, will not necessarily protect the organisation from claims that it is infringing the bait advertising or misleading and deceptive conduct provisions, as contained within the CCA.

Despite the above, you have probably seen these types of conditions used in a number of situations, and the mere use of the same does not mean that the offer is necessarily misleading and deceptive or infringing the bait advertising provisions. It will ultimately depend upon the circumstances of the offer, and how and where it is advertised.

Limiting An Offer By A Number

As you would appreciate, it is often difficult to forecast the success of a promotional activity. For example, the promoter may not have any pre-existing information to reasonably forecast expected demand. Or, as has happened with a client in the past, the promotion is high-jacked by a bunch of consumers, whereby they placed a promotional code taken from a magazine on a website, and told everyone to take up the offer. The client thought the offer would be only communicated to magazine readers, but subsequently was advertised to the world at large.

One of the best ways to avoid infringing the bait advertising or the misleading and deceptive conduct provisions, as contained in the CCA, is to clearly nominate the availability of promotional stock in the advertisement.

Example B.

A phone dealer had some leftover stock of Apple iPhones. The dealer wanted to advertise a run out sale, to sell the remaining stock via way of a catalogue. It would be acceptable to use the following:

8GB Apple iPhone just $299 - only 6 available

The dealer, in the above example, has clearly nominated the availability of stock. This example is clearly not bait advertising

Clearly Example B is a type of promotional offer that would not require trade promotion lottery permits. This type of advertising is undertaken all the time without permits. There is no prize being offered.

There are, however, situations whereby if you impose limits on a particular offer, there could be a need to obtain trade promotion lottery permits. For the purpose of this advice, I have provided a number of different examples, in an attempt to explain when and where you would require trade promotion lottery permits. This advice is based on how I understand the various lottery departments currently assess certain activities. The lottery departments constantly change their views, so it would be prudent to check each time before deciding whether a particular promotion requires a trade promotion lottery permit.

Limited gift with purchases and first entries received

Example 1: Buy Coca-Cola in-store to receive a cap in-store. Advertised with a limit of 100 caps in-store.

NSW, ACT, VIC, NT - No permit is required.

SA - Yes permit is required.

NOTE: There may be an option to avoid a SA permit if the offer is only advertised in-store "As while stocks last", i.e. do not mention the limited number of gifts.

In all cases the promotional material must be removed from display once the gifts are exhausted.

Example 2: Buy Coca-Cola in-store and send in an entry from to receive a cap. Advertised with a limit of 100 caps.

Vic, NT - No permit required.

NSW, ACT, SA, - Yes permit required.

NOTE: Unfortunately there is no way around this. Furthermore, NSW now treats this as akin to an instant win promotion and therefore all gifts must be given away, even if there are less claims received than gifts available. Sometimes you can seek a waiver from NSW, but this will depend upon the value of the gift.

Limited gift with purchases and first entries received

Example 3: Sign up to become a member of an internet site online to receive a cap. Advertised with a limit of 100 caps.

NSW, ACT, VIC, NT - No permit is required.

SA - Yes permit is required.

Example 4: Buy a Coca-Cola and enter online. Advertised with a 100 caps available.

Vic, NT - No permit required.

NSW, ACT, SA, - Yes permit required.

NOTE: In NSW they treat these differently to in-store promotions, because at the time of purchase the person does not know if there are caps available.

Example 5: SMS a number to receive a cap. Advertised with a limit of 100 caps.

Vic, NT - No permit required.

NSW, ACT, SA, - Yes permit required.

 

PLEASE NOTE:

This important information has been provided to SAM Sales and Marketing by the Australian Communications Council. If you have any queries regarding state specific permit requirements for consumer and trade promotions please contact Peter McKinnon – (03) 9646 5644 or email peter@samsales.com.au

SAM Sales and Marketing provide consultancy services for Australasian Promoters who require permits. SAM can assist to explain state specific regulations, draft promotion Terms and Conditions and lodge permit applications. SAM can also conduct prize draws and book Public Notice Winners Announcements as required.