26 Sep 2013

Social media trade promotions: be aware of the legal issues

by Sharon Segal, Aimee Pomogacs

Social media trade promotions must comply with the usual law on trade promotions - and a few more that are unique to social media.

Consumer competitions or contests, generally known in Australia as "trade promotions", are a popular way for businesses to promote their goods and services. With social media now a mainstream business communication tool, the attraction to social media for running a trade promotion is obvious.

Social media trade promotions give social media users a reason to engage with your business on social media. With an ever increasing number of social media users, trade promotions are an effective way to acquire followers for your branded social media sites, create hype for your brand and provide you with potential data capture opportunities.

But before you get too carried away coming up with a clever social media promotion, there are legal issues you need to take into account. Some of the key legal issues are discussed below.

Social media provider terms and conditions

When registering for a social media platform, a business enters into a contract with the social media provider. The terms of the contract are recorded in the social media provider's terms of use, generally published on the social media platform's website. Any use of the social media platform by the business is governed by that contract.

The major social media providers regulate the use of advertising and promotional campaigns conducted using their platform through specific terms of use. You need to check that your proposed trade promotion complies with those terms of use. If you fail to follow the terms imposed by the social media provider, you risk the relevant site removing your trade promotion (and your account).

For example, Facebook's "Pages Terms" contain specific rules for running trade promotions on Facebook. Until recently Facebook insisted that promotions are run through its Apps site. Now, promotions may also be run on branded pages (for example, "comment/like our Page to enter" is permitted), but not on personal pages (for example, "share on your Timeline to enter" or "share on your friend's Timeline to get additional entries" is not permitted).

Promotions on Facebook must include a release of Facebook from liability for the promotion by each entrant and an acknowledgement that the promotion is in no way sponsored, endorsed or administered by Facebook.

Trade promotion regulations

Each State and Territory in Australia has its own set of regulations setting out how trade promotions should be conducted in that State or Territory. Social media trade promotions need to comply with those regulations just like traditional trade promotions.

The trade promotion regulations apply to lotteries and competitions/games where an "element of chance" is involved. An element of chance may be involved even if some skill is also required. "Chance" includes any kind of draw and also concepts such as "the first correct entry received". If the promotion involves both skill and chance, the trade promotion regulations will apply. The trade promotion regulations will not apply if the relevant promotion is solely a "game of skill" (for example, where all entries are genuinely judged and the best is declared the winner).

Subject to the specific eligibility requirements, social media trade promotions will generally exceed traditional state boundaries and constitute a promotion in many (if not all) States and Territories and not just the one where the competition or promotional activity was originally devised. The trade promotion must comply with the regulations of each of the relevant States and Territories.

Businesses may find that some of their creative ideas for a social media promotion are not accommodated by the regulations which were designed for more traditional trade promotions. For example, notifying winners by sending out a Tweet or posting a message on your Facebook page, in the hope that your messages will go viral in search of the winner, will be difficult to reconcile with the requirement in some States and Territories that winners are notified personally (for example, face-to-face or by mail, telephone or e-mail).

Advertising industry codes

The advertising industry in Australia is self-regulated under various advertising codes, the key one being the Code of Ethics of the Australian Association of National Advertisers, the peak national body for advertisers. Complaints about advertisements not complying with these advertising codes are heard by the Advertising Standards Board.

Social media is treated like any other advertising platform for the purposes of the advertising code, and trade promotions are a form of advertising. For businesses running promotions through social media sites, this means you need to ensure your social media trade promotion complies with the relevant codes.

For example, in 2012, the Advertising Standards Board ruled that a Facebook trade promotion conducted by lingerie company Bendon which encouraged people to take and upload photographs of themselves with their best friends breached the Code of Ethics. The promotion invited participants to "take selfies with Besties to win weekly loveable prizes".

A complaint was made that the promotion encouraged young girls to take photos of themselves in their underwear and post them on the internet, a practice known as "sexting". Although no photos of young girls in their underwear featured in the relevant Facebook gallery, the Board found that the promotion did encourage sexting and breached the provisions of the Code of Ethics which require that advertising does not depict materials contrary to prevailing community standards on health and safety.

It is important to note that compliance with the advertising codes is voluntary and determinations by the Advertising Standards Board are not legally binding. Failure to comply with the codes, or even a Board decision, is not in itself a breach of the law and the Board does not have power to enforce its determinations – although non-compliance could give rise to negative public relations consequences.

Misleading or deceptive conduct

Social media trade promotions must also comply with the overarching prohibitions against misleading or deceptive conduct found in the Australian Consumer Law. Not only must you ensure your promotion is not misleading (for example, if there's a catch to claiming a prize, you must let participants know at the outset), any false or misleading comments that appear on your social media pages as part of your social media promotion, regardless of whether they are user-generated or generated by the business, may be held to breach the Australian Consumer Law.

Just because social media is more fast-paced does not mean you can avoid laws prohibiting misleading content. Relevant content should be checked and cleared in the same way as claims in traditional media.


There is no doubt that the reach and effectiveness of trade promotions can be enhanced when those promotions are communicated and/or conducted via social media channels. While there is significant value in involving social media in any trade promotion, businesses must not ignore their legal obligations in this context.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.