Why do Canadian contests require a skill-testing question?

Every year, millions of Canadians participate in promotional contests to try their luck and win a prize, from all-expense paid vacations to a free doughnut.

One thing to know about most promotional contests in this country is that they often require more than just luck they also require skill.

If you enter enough contests in Canada you will become acquainted with the skill-testing question, often in the form of a multi-step mathematical question.

It's one of the quirks that companies opt for when running a contest or giveaway in Canada, legally.

So what are the rules?

Rules around contests are governed by several different pieces of legislation, including the Competition Act, anti-spam rules and theCriminal Code.

In the Criminal Code, there are sections that cover running illegal lotteries, much of which first originated in U.K common law, according to Steve Szentesi, a competition and advertising lawyer based in Toronto.

In Canada, lotteries are really only allowed to be run by the government, or a group licensed by the government.

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For everyone else, games of pure chance are illegal if they require a purchase or money as are games of mixed chance and skill if they also require a purchase and award prizes that are goods, wares or merchandise.

And a skill-testing question can transform a contest from pure chanceinto mixed chance and skill.

Companies running promotional contests often aim to avoid having an illegal lottery by having both a skill-testing question,and by having"no purchase necessary" to enter, to avoid the consideration element in the Criminal Code offences.

If a contest has a pay method of entry, then the company must also include a bona fide free entry option. This even includes contests like Tim Hortons' Roll Up The Rim To Win.

Contests that are pure skill, like a photo competition with judging, don't need a skill-testing question, though there are still rules to govern these like disclosing how the judging works.

What are the cross-border differences?

Although Szentesi isn't a U.S. lawyer,he does often work with companies that run cross-border promotional contests.

Although many of the underlying principles are the same for what governs these contests in the U.S like having a no-purchase entry option Szentesi said when he talks to his American counterparts they are often perplexed at the Canadian quirks.

"They don't have the skill-testing question requirement under their law, so it's always a bit of a head-scratcher for them explaining what this is and why it's required in Canada," he said in an interview last month.

In the past, many promotional contests in Canada opted to exclude Quebec due to the province having its own, unique regulatory rules that required contest organizers to register with the province's regulator and pay associated fees.

But last fall the province opted to scrap its own rules, which Szentesi says is a game-changer.

"It's a huge, huge change," he said. "Before, probably two-thirds of brands would sort of shy away from Quebec because you needed a number of requirements."

How to not break the law

In addition to the skill-testing questions and no purchase entries, Szentesi said every legal contest needs a full set of rules and regulations that aren't false and misleading, or they could violate the Competition Act.

There are also rules for disclosure, which includes several things organizers must disclose like the number and value of prizes, the dates of the contest, the odds and who is eligible.

Szentesi said contract law, privacy law and anti-spam legislation can also come into effect for brands that hold contests the latter is especially relevant given the deluge of online contests in recent years with brands hoping to build their marketing or marketing list.

Szentesi said reputable companies aren't looking to break the law.

"One of the first questions I ask my clients is, is the business the contest?" he said.

"And after three or four or five minutes I can tell if what they're trying to do is essentially run an illegal lottery and call it a contest or if they're a reputable, reputable brand and they want to comply with the laws and promote their existing product."

So why use them?

With all the rules surrounding promotional contests and the costs involved, why do companies and organizations still use them?

Donovan Vienneau is the general manager for Taste of Edmonton, a large food festival run by a non-profit group.

His organization runs a lot of contests and he said it's one of the best ways to engage their audience and promote their partners.

"Everybody loves something for free, " he said.

Vienneau said the organization tries to start running its promotional contests around the same time that pre-sales go on sale to help get people thinking about the festival.

It can also be a chance to bring people to the festival who don't normally attend.

"It allows us the opportunity to meet some new people, see some great faces and you know the strategy behind it is we want to keep Edmontonians full and keep coming back for more."