Offering prizes to customers is a common incentive used by businesses to promote their products and services. These types of sales promotions are considered a form of gambling and are strictly regulated.

The most common sales promotions are raffles, but additional types of sales promotions such as sweepstakes and games of chance are also captured under the restrictions.

Pricing

A business cannot make a commercial gain from a sales promotion by inflating the price of their goods and services or charging an entry fee. Customers should not have to pay to download any app used in association with a promotion, but they can be asked to pay the entry costs at standard postage or text messaging rates.

Terms and Conditions

Businesses need to take care drafting the terms and conditions of entry, which must not mislead customers about the likelihood of winning. Promotional material should outline the start and end date of the promotion, the conditions for entry, and identify how and when a winner will be selected/contacted.

Online activities

Extra care needs to be taken with promotions collecting payment online as these are more strictly regulated and are limited to lotteries (where the winner is drawn after all tickets have been sold).

Prizes

If the prize is worth more than $5,000, then the organiser will need a gambling licence. Certain prizes are prohibited, including:

  • Firearms, explosives, restricted weapons, or airguns;
  • Liquor;
  • Tobacco products;
  • Taonga tuturu;
  • Vouchers or entitlements to commercial sexual services; and
  • Vouchers or entitlements to any of the things listed above.

A tobacco or liquor store can still run a sales promotion, but is prevented from using any of the things prohibited as the prize.

The winner can be determined by chance or a combination of skill and chance.

Summary

Sales promotions are a great opportunity to drive up customer engagement with a company’s brand and products, but it’s important to make sure you comply with the law. If a sales promotion does not comply, the organiser can be fined up to $20,000 for an individual or $50,000 for a body corporate.

If you are unsure about your obligations under the Gambling Act, it is always best to take legal advice.

 

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Rachel Collins and Charlotte Cameron 

Associate/ Law Clerk
Wellington