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Trade Promotion Competition Licence

2017-02-28

Introduction

The fight for customers is fierce nowadays and all sorts of business promotion events are thus held to boost sales, promote new products or services and / or advertise the company’s brand. Among these business promotion events, it is not uncommon to see some promotional competitions with a chance of winning a prize in return. In these cases, one should not neglect its potential compliance requirement – the trade promotion competition licence (the “Licence”).

The Licence

Background

The Licence is one of the many licences administered by the Office of the Licensing Authority (“OLA”) under the Home Affairs Department and is governed by the Gambling Ordinance (Cap 148) (the “Ordinance”). The Ordinance, as its name suggested, is to govern gambling activities, but it goes wider to also prohibit any games / events involving a “by-chance” or “luck” element, which may hence include certain business promotion events.

When is the Licence necessary?

Under section 2 of the Ordinance, a competition or other scheme promoted, conducted or managed for the purpose of promoting a trade or business or the sale of any product is a “trade promotion competition” (推廣生意的競賽).

Therefore, for those business promotion events which are competitive in nature, they are likely to be trade promotion competitions. At the same time, they may also constitute “lottery” (獎券活動) and / or “gaming” (博彩) under the Ordinance if, generally speaking, a “by chance” element is involved. Pursuant to the Ordinance, “lottery” covers, among others, any competition for money or other property success in which does not depend to a substantial degree upon the exercise of skill by the competitors, while “game” (博彩遊戲) includes a game of chance and a game of chance and skill combined and a pretended game of chance or chance and skill combined. Typical examples of business promotion events falling within the meaning of “lottery” and / or “gaming” are lucky draws by department stores to boost sales and Facebook events to promote a product with the prize winner to be determined by a lucky draw.

However, both “gaming” (i.e. playing of or at any game for winnings in money or other property) and “lotteries” are unlawful under the Ordinance unless it is licensed with the Licence. Thus, a lot of business promotion events may actually need the Licence.

Application and restrictions of the Licence

The application procedures for the Licence themselves are not too complicated. One may simply apply by submitting the application forms with the supporting documents and application fees to OLA.

Nevertheless, practically we may wish to avoid the Licence because of the restrictions it imposed, for example, advertisement of the competition cannot be made before the Licence is issued, a competition period (including the advertising period) exceeding 3 months is normally disallowed, change cannot be made (including cancelation or cutting short the period of competition) once the competition has been commenced etc. Further, with the Licence, the following licensing conditions should be complied with:

  • No prize offered shall be a money prize;
  • No fee shall be charged for entering the competition;
  • The designated trade promotion competition licence number has to be stated in the advertisement in respect of the competition; and
  • Within ten days from the date of the drawing or judging of the competition, details of the results shall be published in one English and one Chinese newspaper circulating in Hong Kong, and a copy of the relevant newspaper cuttings shall be forwarded to the Officer.

Non-compliance with these licensing conditions may result in the Licence being revoked and also a commission of an offence liable on conviction to a fine of $50,000 and imprisonment for 2 years.

Conclusion

In short, businesses should carefully consider whether the Licence will be required and whether they wish to be bound by the restrictions of the Licence when they design a business promotion event. If you wish to avoid the Licence, you shall set certain criteria in ascertaining the winner of these business promotion events to eliminate any “by chance” element, e.g. the fastest participant will win. However, even with that in mind, one shall note that in the event of 2 participants satisfying the same criterion, e.g. 2 participants answered correctly in the exact same time so both of them are the fastest, the final determination as to who shall win should not involve any “by-chance” element.

For enquiries, please contact our Corporate & Commercial Department:

E: cc@onc.hk

T: (852) 2810 1212

W: www.onc.hk

F: (852) 2804 6311

19th Floor, Three Exchange Square, 8 Connaught Place, Central, Hong Kong

Important: The law and procedure on this subject are very specialised and complicated. This article is just a very general outline for reference and cannot be relied upon as legal advice in any individual case. If any advice or assistance is needed, please contact our solicitors.

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