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Sales Promotion Schemes
What is a sales promotion scheme?
Only manufacturers, distributors, wholesalers and retailers can run sales promotion schemes, a marketing technique that uses a prize competition, lottery or instant game to promote the sale of goods and services.
Provided your scheme complies with Section Two of the Gaming and Lotteries Act 1977 (summarised below), it does not need a licence.
- A prize competition relies on skill or knowledge and an element of chance to determine the outcome.
- The result of a lottery is decided by a draw. The draw must be random and entirely dependent on chance.
- The result of an instant game is determined before or at the same time as the sale of a ticket. Wins are revealed by scratching a card, opening an envelope or putting the pieces of a puzzle together.
You cannot use a gaming machine to conduct a sales promotion scheme.
Other legislation such as the Fair Trading Act may also affect your sales promotion scheme. To check that your sales promotion scheme is legal, we recommend that you contact your solicitor.
Customers must pay no more than the usual retail price of the product to enter a sales promotion. Your promotional material should state what and how much the customer has to purchase to enter the promotion. For example, they might have to buy one item, or spend a specific amount of money on the promotional product to enter.
A sales promotion scheme automatically becomes an illegal competition under the Act if more than the usual retail price is asked for the good or service as a condition of entry.
- A retailer runs a lottery as a sales promotion scheme to sell chocolate bars worth NZ$1.00 each. The winner of the promotion will get a new car.
The competition is an illegal lottery if:
- Customers buy a chocolate bar, fill out an entry form and then pay 50 cents more to enter. This is because the retailer is charging more than the usual retail cost of the chocolate baras the cost of entry to the promotion.
The competition is a sales promotion scheme if:
- Customers buy a chocolate bar, fill out an entry form and go straight into the draw to win the car. This is because the customer does not pay more than the normal retail price of the chocolate bar to enter the promotion.
Sales promotion schemes must be run within a specified period of time, made clear in promotional material.
A sales promotion scheme can be run by a single business, or by a group running a joint promotion. Customers who buy goods from participating businesses would then become eligible for prizes in the joint competition.
It is illegal to offer the following as prizes:
- firearms and ammunition
- second hand goods
- land not zoned residential (e.g. commercial/industrial land)
- vouchers or entitlements for the above.