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A nationwide trade promotion can be an effective way to promote and grow interest in your brand, business or franchise. However, there are specific requirements that you must comply with when conducting such a promotion. This article will outline:

  • what a nationwide trade promotion is;
  • key promotion conditions;
  • the conditions for entry into the promotion; and
  • the prize conditions you must comply with whilst conducting a nationwide trade promotion in New Zealand.

What is a Nationwide Trade Promotion?

A trade promotion, or a sales promotion scheme, is a marketing technique. It involves a business or franchise offering consumers a chance to go into a draw to win a prize, after purchasing a product or service from them. A nationwide trade promotion is when a business with multiple locations, or a franchise, decides to adopt this marketing technique across all of its locations.

For example, an individual may buy an appliance or product from a supplier, fill in an entry form and go into the draw to win a weekend holiday.

In New Zealand, sales promotion schemes are considered a lottery. As it is a lottery, and thus comes under the category of ‘gambling’, there are certain legal requirements you must comply with. Once the sales promotion scheme has started, you cannot change any of the promotion conditions. Therefore, you must ensure that you have complied with all of the below requirements, prior to commencing the nationwide trade promotion. 

Promotion Conditions

There are specific legal requirements that relate to you as the promoter of your business or franchise.

Promoter Conditions

You, as a business, cannot make any commercial gain from the trade promotion. Any gain that you do make has to be from the normal transaction of trading goods and services. Therefore:

  • the business cannot sell goods or services for a price higher than its usual value. The price of these items or services can be on discount; and
  • all of the goods and services sold under the trade promotion must be goods that you normally sell, create or distribute.

You are also under an obligation to ensure that all of the sales promotion scheme conditions are made clear to potential customers via promotional material before the period of the scheme begins. 

Digital Promotions

If you wish to promote or conduct your nationwide trade promotion online, your business must comply with certain requirements. This is to ensure that the promotion is not considered remote interactive gambling. 

Remote interactive gambling is a form of gambling that is played at a distance, either via some communication device or through another person. Remote interactive gambling is illegal gambling in New Zealand. 

To ensure that your sales promotion is lawful, you can only accept online participants in the sales promotion if it is a lottery. A lottery is when a winner is drawn after all of the tickets, such as receipts proving purchases from your business, have been entered, after the end date of the promotion. If your trade promotion is not a lottery, you still can:

  • promote your goods and services, or the promotion itself, online; or
  • accept entries into the promotion, without payment, through text or an online app.

Entry Conditions 

When your business is determining how the nationwide trade promotion should take place, ensure that it does not cost participants anything additional to the normal price of the goods or services to enter. To do so would be to make additional commercial gain from the trade promotion. 

You are entitled to ask people to pay the cost of sending their entry in. This may be through a text message, or by posting an application form. However, this cost must be no more than the standard rate. If entry into the trade promotion requires an app, it must be free for all users to download. 

Prize Conditions

The promotional material that informs participants about the promotion must clearly explain:

  • how you will determine the winner. The winner may be chosen entirely by chance, such as by a lottery, or partially by skill or knowledge. For example, the participant may have to answer a series of questions about your business; 
  • when you will notify the winner or winners; 
  • how you will notify the winner or winners that they won; and
  • what prize the winner will receive. The prize details will include (if it is not a cash sum) a description and the retail value of the prize. 

You should take care when determining what prize you will award the winner of the promotion. Certain prizes are prohibited from being awarded in a trade promotion in New Zealand.

These prohibited prizes include:

  • firearms; 
  • explosives;
  • restricted weapons;
  • alcohol; and
  • tobacco and tobacco products. 

Furthermore, if you have a wide range of individuals who will participate in the promotion, you should ensure that the prize is age-appropriate. For example, a weekend trip for one would not be appropriate for a young customer of your business or franchise.

Key Takeaways

A nationwide trade promotion, or a sales promotion scheme, can be an extremely effective marketing technique, to increase your business’s popularity and gain new customers. However, it is considered a form of gambling in New Zealand. To ensure that your promotion scheme is legal, there are key requirements that you must comply with. These requirements include:

  • ensuring that you do not make any commercial gain from the promotion, aside from usual trading. This means that you cannot charge any entry fees; 
  • informing all participants of the conditions of promotion before they participate, including how you will decide on a winner; and
  • ensuring that the prize is legal and age-appropriate. 

If you are unsure whether your nationwide trade promotion meets these legal requirements, contact LegalVision’s New Zealand regulatory and compliance lawyers on 0800 005 570 or complete the form on this page.

Frequently Asked Questions

What is the difference between promotion and sales promotion?

A promotion is any activity that a business carries out to gain more customers or traction. A sales promotion scheme is a type of promotion in which a business offers consumers a chance to go into a draw to win a prize, after purchasing their product or service.

Do sales promotions work?

Sales promotion schemes, if done properly and in compliance with legal requirements, can be an extremely effective way to promote your business and gain more customers.

What are examples of sales promotion?

The following is an example of a sales promotion scheme. An individual buys an appliance from a supplier and fills in an entry form and goes into the draw to win a weekend holiday.

What is the most common type of sales promotion?

In New Zealand, the most common type of sales promotion scheme is through a lottery. All of the participants will fill in some form to enter into a draw, and the winner’s name will be drawn from this group. 

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