Mitigating Legal Risks and Staying Compliant While Running a Successful Online Contest


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An overview of the laws, enforcement practices and industry guidelines regulating all contests (including those under the Criminal Code, Competition Act and Quebec's special contest laws), with special consideration of the risks involved when hosting a contest online.

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Mitigating Legal Risks and Staying Compliant While Running a Successful Online Contest

  1. 1. MITIGATING RISKS AND STAYING COMPLIANT WHILE RUNNING A SUCCESSFUL ONLINE CONTESTBill Hearn, Counsel, Davis LLPDarren Kirkwood, Legal Counsel, Maple Leaf Sports & Entertainment Ltd. Managing Legal Risks in Running Online Contests The Canadian Institute Toronto, June 21 – 22, 2012
  2. 2. Overview• All Contests (i.e., Offline, Online and Mobile/Text) – Canadian Law & Practice – Compliance Concerns • Criminal Code • Competition Act • Quebec’s special contest laws • Contests for kids & teens • Contests involving special products – e.g., liquor & NHL tickets 2
  3. 3. Overview• Online Contests - Special Risks to Mitigate • Competition Bureau’s Information Bulletin on Application of Competition Act to the Internet and compliance risk • User generated content (UGC) & intellectual property (IP) and trade defamation/commercial disparagement risk • Personal information (PI) and privacy law risk 3
  4. 4. Overview• Online Contests - Special Risks to Mitigate • Canada’s new anti-spam law (CASL) & refer-a-friend risk • Cheaters - hacked PIN code & voter fraud risk • Global contests and local law compliance risk 4
  5. 5. Overview• Contests on Social Media Platforms – Special Considerations • Facebook • Twitter 5
  6. 6. Overview• How To Manage Contest Risks• Wrap Up 6
  7. 7. Not Covering in Presentation• Contests on Mobile/Text Platforms – Special Considerations • Quick response (QR) codes • Near field communication (NFC) tags • Canadian Wireless Telecommunications Association (CWTA) Canadian Common Short Code Application Guidelines 7
  8. 8. The Starting Point• Primary objectives are usually to sell products and services, build brand/customer awareness, drive traffic to stores/events/websites/platforms, develop consumer databases …• Creative is King!• But don’t give short shrift to legal compliance 8
  9. 9. The Stakes are High• United States: Pepsi – “Play for a Billion Dollars” Sweepstakes 9
  10. 10. The Concepts are Varied• Canada: Win a Baby* • Fertility treatment procedure prize (ARV $35K) * Baby may not be exactly as shown. 10
  11. 11. The Contests Are EngagingMercedes-Benz Drive and Seek Mobile App Game 11
  12. 12. . Canadian Law & Practice for All Contests 12
  13. 13. Contests and the Criminal Code The Skill-Testing Question (STQ)• Sections 206(1)(a) to (d) prohibit schemes for disposing of property by “any mode of chance”• Supreme Court of Canada has clarified that only games of “pure chance” are prohibited• A proper STQ converts a game of pure chance into a game of mixed chance and skill• 4-step (multi-operation) grade-6 level math question is usually sufficient skill test for adults 13
  14. 14. Contests and the Criminal CodeSTQ Must be Reasonable and Fairly Asked -Ranger v. Herbert A. Watts Ltd., Ontario High Court, 1970• Contest sponsor has duties: • to ask “reasonable” STQ • to ensure the test is conducted with “essential fairness” to contestant to include at least • reasonable advance notice • prior communication of the rules for the test • a means whereby contest judge can discover contestant is in reasonable condition to engage in test • conducting the test fairly in the circumstances 14
  15. 15. Contests and the Criminal Code STQ Being Answered Correctly, on Time and Without Assistance• Unclear whether placing the math STQ on entry form is acceptable but likely okay if completed immediately and placed in ballot box at place where it was obtained – this works for traditional in-store paper entry form contest• If math STQ to be included as part of online entry process, consider imposing time restrictions and advising entrant not to use the assistance of other people or calculators because there is case law that the question is not a skill test if the entrant has as much assistance as desired and there is no time restriction• Entrant should certify that they have complied with the contest rules• Consider providing flexibility in contest rules for “2nd chance STQ” 15
  16. 16. The Skill Chance Continuum: Games of Skill vs. Games of Chance Guess # of Bridge Games of beans in a jar (1968) Pure Skill (1884) Throwing Deposit $ dimes in Different dishes/cups cigars (1979) (1903) Answer math STQ Est. # of Bottle (1984) votes in Knock-Over election (1974) (1904) Darts (1980) Crane Estimate Time Game Barrel travels Book with (2002) (1949) Lottery ticket and STQ (1995)Temperature QuestionsEstimate where(1932) Draw and answers Limited Time obvious given Mechanical Trivia Game STQ (1968) Vending (1989) (1958) Machine (1931) Potato Peeling Skill Puzzle Contest Board (1954) (1938) Est. # of railway Passengers Turkey Shoot Video (1928) (1902) Lottery Games of (1998) Pure Chance 16
  17. 17. Contests and the Criminal CodeHow Ontario courts recently defined “game of pure skill” –R. v. Balance Group International Trading Ltd., Ontario CA, 2002• The crane game is a game “of mixed skill and chance with an overwhelming degree of chance and merely a dash of skill” - conviction upheld, $50 fine – criminal record, costs, 2 years in court • Average player simply could not exercise sufficient skill to compensate for the other elements of the game that were wholly beyond the power of the player to influence • The ability of the player to control the crane’s lateral movement gave the appearance of an element of skill … but there were too may other variables far more important than the positioning of the crane that would overcome what little skill the operator might bring to the game • Just because some elements of the game are out of the control of the player does not make the game one of mixed chance and skill … but it is not a game of pure skill where virtually all of the elements of the game are out of the control of the player • This was not a case where there were some unpredictable elements that might occasionally defeat the player’s skill, but the systematic resort to chance 17
  18. 18. Contests and the Criminal Code “No Purchase Necessary”• Section 206(1)(f) makes it an offence to: dispose of any goods, wares or merchandise by any game of chance or any game of mixed chance and skill in which the contestant or competitor pays money or other valuable consideration 18
  19. 19. Contests and the Criminal CodeCharging a Fee to Play/Forcing a Purchase?• Fees can be charged where: • The contest is one of “pure skill” – e.g., a juried photo contest or dance competition • The prize is not “goods, wares or merchandise” 19
  20. 20. Contests and the Criminal Code No Purchase/Consideration Necessary?• Does a free website contest involve a “purchase/consideration” requirement in the form of Internet access fees?  Probably “no” as free Internet access and free email addresses are so widely available in Canada• Do text message fees constitute a “purchase/consideration” requirement?  It depends Possibly “no” based on fee being nominal and paid to 3rd party mobile services provider (akin to postage stamp for mail-in AMOE). But US case law has held that premium text fees for entering contests (where entrants are charged a fee in addition to the standard text message fee) are payments• No Canadian case law on these questions so risk averse contest sponsors often still include free mail-in AMOE. But generally accepted that purchase of stamp is not offside – largely because of minimal cost and that payment is not made to contest sponsor; can be argued that same approach should apply to online and text entries 20
  21. 21. Contests and the Criminal Code No Purchase/Consideration Necessary?• A contest open to spectators at a particular event (e.g., a hockey game) where payment is required to enter does not run afoul the no-purchase requirement provided the contest is not promoted outside the event. That`s because payment for the game ticket was not made in order to enter the contest• Likewise, a contest open to AMEX card holders where a fee is required for the card does not run afoul the no-purchase requirement provided the eligible entrants are limited to those who had cards prior to the contest start date. Again, that`s because the purchase of the card would not have been made in order to enter the contest 21
  22. 22. Contests and the Criminal Code What constitutes “other consideration”?• Contestant giving up something of value to them, – e.g., their personal information or that of their friends and family (if used other than to administer the contest), their time and/or opinions through a “substantial effort” (e.g., to complete a lengthy survey, study product information, sit through a sales pitch/product demonstration, navigate through a website)• Arguably, the consideration need not be of value to sponsor, but if it is, then even more difficult for sponsor to contend it is not consideration – e.g., 50-word essay requirement in AMOE should not be on a topic that the sponsor intends to use for market research or future advertising 22
  23. 23. Contests and the Criminal CodeThe “equal integrity principle” and the free AMOE• “Equal integrity” refers to notion that all entrants should be treated equally• Term appears in no reported Canadian case but prominent in many US judgements –especially those dealing with online contests where online participants enjoyed a distinct advantage over their off-line counterparts• Problems may arise when an advantage – in the form of a superior method of entry or better odds – is associated with a purchase or provision of other consideration 23
  24. 24. Contests and the Criminal CodeThe “equal integrity principle” and the free AMOE –R. v. Brennan, Alberta Provincial Court, 1995 and Court of Appeal, 1996• Case considered legality of contest promoting sale of book of poetry• While a single ticket for the contest was available without purchase upon request, the trial judge found that there was a “reluctance” to give free tickets; everything was geared to the giving of five tickets on the purchase of the book• As a result, the “no purchase” method provided no defence and accused was found guilty of violating section 206(1)(f)• Court of Appeal, orally and without reasons, set aside the conviction• The trial court decision suggests that the free AMOE may lose its efficacy if disparities in treatment become too glaring• Contest sponsors should still attempt, where possible, to minimize disparities in treatment between paying and non-paying entrants 24
  25. 25. Contests and the Criminal Code• Penalty • Indictable offence punishable by imprisonment for a term not exceeding two years or • Summary conviction offence punishable by a fine not exceeding $25,000 25
  26. 26. Contests and the Competition Act• Full Contest Rules - Adequate and Fair Disclosure, s. 74.06 • Number and approximate value of prizes • Area to which prizes relate (i.e., any regional allocation) • Any fact within the knowledge of the contest sponsor that materially affects chances of winning (such as mechanics of contest and odds of winning) 26
  27. 27. Contests and the Competition Act• Contest Rules - Adequate and Fair Disclosure, s. 74.06• Disclosure must be made: • In a reasonably conspicuous manner • Before the potential entrant is inconvenienced in some way or has committed to the contest or products being promoted by the contest 27
  28. 28. Contests and the Competition Act• Short List Disclosure of Contest Rules (“Mini-Rules”) • number & ARV of prizes • regional allocation of prizes, if any • chances of winning and any other fact that materially affects chances of winning • requirement to answer correctly STQ • date contest closes • no purchase necessary • place where full contest rules available (at POS or online…can’t just be inside product “box”) 28
  29. 29. Contests and the Competition Act• Mini-Rules Disclosure in Ads: • Packaging • Point-of-Sale • Billboards • Newspaper • TV • Radio • Internet • Wireless devices 29
  30. 30. Contests and the Competition Act• Mini-Rules Disclosure in Ads: • Competition Bureau’s position on disclosure and fine print: • Must be large enough to be clearly visible and readable without resort to unusual means (e.g., magnifying glass) • Should never be smaller than 7 point font This is 7 point font. • On TV/radio should be comprehendible in one normal viewing/listening – e.g., sponsor can’t rely on possibility that potential entrant will view/hear the advertisement many times or being able to record and “freeze frame” it to have the time necessary to understand the disclosure. • But this position may not make sense when the ad is shown only online and can be easily paused by the viewer 30
  31. 31. Mini-Rules on Packaging for Offline Contest 31
  32. 32. Sample Mini-Rules in Advertising for Online Contest Mini Rules * NO PURCHASE NECESSARY. Closes May 25/12 at 11:59:59 pm ET. Full rules (including details of qualifying transactions/no purchase entry and complete prize description) at Open to legal residents of Canada (age of majority). One (1) grand prize available, consisting of a trip to London, England to attend the London 2012 Olympic Games (ARV: $19,000 CAD). Odds depend on number of eligible entries. Skill-testing question required. 32
  33. 33. Sample Mini-Rules in Advertising for Online Contest Mini-Rules * No purchase necessary. Contest runs from 12:00:00 a.m. EDT on May 1, 2012 to 11:59:59 p.m. EST on January 31, 2013. Contest is open to individuals who reside in Canada, are over the age of majority in their province or territory of residence, who are active epost users, and who have subscribed to at least two epost mailer bills throughout the previous 60 days. There are a total of 9 prizes available to be won, each with a value of CAD $1,000. There will be one prize draw per month during the contest period. Odds of winning depend on number of entries received. Selected entrants must answer a mathematical skill testing question and sign a release. Full contest rules are available at 33
  34. 34. Sample Mini-Rules in Advertising Contest on Facebook Mini-Rules •No purchase necessary. For full rules and how to enter, visit Contest closes 03:00:00 pm EDT on June 29, 2012. One (1) Grand Prize available to be won, consisting of a $2,000.00 (CDN) RBC ® Visa Gift Card. The odds of winning the Grand Prize depend on the total number of eligible entries received during the Contest Period. Must be a resident of Canada and be age of majority. Correct answer to mathematical skill testing question required. 34
  35. 35. Sample Mini-Rules in Advertising Online Contests Mini-Rules * No purchase necessary. Odds of winning depend upon the number of eligible entries received, text charges may apply, limit one (1) entry per entrant, per person, per contest period, total of four (4) prizes available each consisting of 5 $100 Tim cards* representing the equivalent of one 14 oz coffee per day for 364 days approximate value $600 per prize, prizes awarded in the currency of the country in which the winner is ordinarily resident, correctly answered skill-testing question required for Canadian winners. Contest closes June 3, 2012. Complete contest rules available at or at participating restaurants ©Tim Hortons, 2012. 35
  36. 36. Contests and the Competition Act• Deceptive Prize Notices, s. 53 • It is a criminal offence for a person, in promoting a business interest or the supply of a product, to send a notice (by regular or electronic mail) giving the general impression that the recipient has won, will win, or will on doing a particular act win, a prize and if the recipient is asked to pay money or incur a cost 36
  37. 37. Contests and the Competition Act• Deceptive Prize Notices, s. 53 • No offence if recipient actually wins the prize and the person sending the notice: • Makes adequate disclosure of full contest rules • Distributes prize without unreasonable delay • Selects participants and distributes prizes randomly or on basis of participants’ skill 37
  38. 38. Contests and the Competition Act• Deceptive Prize Notices, s. 53 • Offence and punishment - • On conviction on indictment, to a fine in the discretion of the court and/or to jail for a term up to 14 years • On summary conviction, to a fine up to $200,000 and/or jail for a term up to one year • Officers and directors in a position to direct or influence the policies of company regarding deceptive notice may be liable • Due diligence defence exists – if person shows they exercised due diligence to prevent commission of offence. 38
  39. 39. Contests and the Competition Act• False and Misleading Advertising Generally • Both civil (s.74.01) and criminal (s.52) provisions • Contest and related advertising can’t be deceptive in a material respect • Criminal provision applies where deceptive representation made “knowingly or recklessly” • No requirement that anyone actually be deceived 39
  40. 40. Contests and the Competition Act• Recent Competition Bureau Enforcement Activity • 2009 Consent Agreement with Elkhorn Ranch & Resort • Bureau investigation concluded Elkhorn had • run contests in 2006 and 2007 without fair disclosure of accurate odds of winning and without ensuring winners were selected on a random basis • given the misleading impression that the grand prize was a brand new SUV when the prize, if awarded, was only a one or two-year lease of an SUV with stringent conditions 40
  41. 41. Contests and the Competition Act• Recent Competition Bureau Enforcement Activity • 2009 Consent Agreement with Elkhorn Ranch & Resort • Elkhorn agreed to pay $170,000 for running misleading contests • Bureau press release stated: “When consumers enter a contest, they should have a reasonable chance of winning based on clear rules … If businesses run bogus contests to attract customers, they compromise the trust of consumers and hurt competition by gaining an unfair advantage over competitors operating legitimate contests” 41
  42. 42. Contests and the Competition Act• Administrative Monetary Penalties (AMPs) • Individuals: • Up to $750,000 for the first offence • Up to $1,000,000 for subsequent offences • Corporations: • Up to $10,000,000 for the first offence • Up to $15,000,000 for subsequent offences 42
  43. 43. Contests and the Competition Act• Competition Tribunal may: • Order restitution to victims of deceptive marketing practices • Freeze assets of accused business and prevent disposal of property before finding• Interim order likely where accused is not a sizable and reputable business 43
  44. 44. Contests and the Competition Act• Consumers (as individuals and, of greater concern, as a class may seek substantial damages in private court actions) alleging that the deceptive element of contest is a criminal offence under the Competition Act• Even if only small compensatory damages for deceived contest entrant, punitive damages claim can be substantial 44
  45. 45. Contests and the Competition Act• See Richard v. Time Inc., Supreme Court of Canada, 2012 > In context of Quebec Consumer Protection Act, compensatory damages of only $1,000 but punitive damages of $15,000 ($100,000 awarded at trial); also plaintiff awarded costs on solicitor-client basis so total value of judgement in $350K range; Time also had its own legal costs• Also costs to contest sponsor’s business and brand with loss of consumer trust and bad PR associated with deceptive advertising 45
  46. 46. Contests and the Competition Act• Competition Bureau’s Program of Binding Written Opinions • $1,000 fee • 2 weeks for “simple” contests • 6 weeks for “complex” contests 46
  47. 47. Contests and Quebec• See Charter of French Language, Rules respecting publicity contests, and Consumer Protection Act• Additional Requirements - Generally • All materials for Quebec residents must be in French • Notice of the contest, together with the applicable duties, a copy of the contest rules, and the text of any advertisement used in the contest must be filed in advance with the Régie (where prizes exceed $100) • Duties based on the value of prizes available to Quebec residents must be paid in advance • The contest rules must contain certain prescribed information • In certain cases, a security bond with the Régie may be required • Specific contest advertising requirements apply 47
  48. 48. Contests and Quebec• French Translation • Régie does not require French translation for rules of contest held exclusively online • French translation only required if contest sponsor is advertising in Quebec or making entry forms (other than online entry forms) available in Quebec • Therefore possible to “register” with Régie without filing a French translation of such rules • That said, the Office of the French Language (which administers the Charter of the French Language) still requires French translation 48
  49. 49. Contests and Quebec• Filing Thresholds • If total prize pool is $100 or less or contest for contest sponsor’s employees only: • No need to file with Régie • No need to abide by Régie’s rules • No need to insert “Régie clause” into the rules • If total prize pool is over $100 but under $2,000.01: • First contest notice thirty days before contest launch (except if prize pool is under $1,000, then file 5 days before launch) • Pay duty upon filing notice • No need to file contest rules or advertisements • No need to submit report after contest completed 49
  50. 50. Contests and Quebec• Filing Thresholds • If total prize pool is $2,000.01 or more: • File notice with Régie 30 days before contest launch • Pay duty on filing notice • File contest rules and advertisements with Régie 10 days before contest launch • Complete and file with Régie written report with name, address and date of awarding the prize for each winner of a prize of $100 or more and verify whether all prizes have been delivered within 60 days of date winner is named 50
  51. 51. Contests and Quebec• Duties for Prizes • If Quebec is part of contest area within Canada, then duty is 3% of value of all prizes • If Quebec is part of contest area that includes jurisdictions outside Canada, then duty is only 0.5% of value of all prizes • If prizes specifically allocated to Quebec, then duty is 10% of value of those prizes 51
  52. 52. Contests and Quebec• Security for Prizes • A security bond must be filed with the Régie in the prescribed form if: • the value of prizes offered specifically to Quebec residents is over $5K or • the total value of all prizes (where Quebec is only part of the contest region) is $20K or more • The Régie will send the bond form if applicable once the sponsor has filed the notice 52
  53. 53. Contests and Quebec• Contest Rules • Many requirements are similar to those under federal Competition Act but some differences – e.g., • Must state the place, date and precise time prize winners will be named and the nature of skill testing question • Must state that sponsor and employees, agents etc. … and persons with whom they are domiciled are ineligible • Must contain the following clause: Any litigation respecting the conduct or organization of a publicity contest may be submitted to the Régie des alcools, des courses et des jeux for a ruling. Any litigation respecting the awarding of a prize may be submitted to the Régie only for the purpose of helping the parties reach a settlement. 53
  54. 54. Contests and Quebec• Special Contest Advertising Requirements • These include that all Quebec contest advertising must: • state the number, value and description of all prizes offered, or state that only one prize is available (if that`s the case), or specify the range of value (i.e., the smallest and the largest) of the prizes • state the nature of the STQ that an entrant must satisfy to claim a prize • not indicate that a person may win a prize when in fact all entrants receive the same prize – this is just a giveaway, not a contest 54
  55. 55. Contests and Quebec• Implications for Contest Sponsors • Quebec residents are sometimes excluded from Canadian contests because of the additional costs and constraints of complying with Quebec’s special contest laws • Sponsor should be prepared to explain “why” to disgruntled Quebeckers – Note: BMO often excludes Quebec residents 55
  56. 56. Contests and Quebec• Eligibility Restriction in “Global” Contest – Sponsor based in Canada with Offices Around the World “Residents of the following jurisdictions are excluded from participating in the contest: Cuba, Iran, Syria, Libya, Myannar (formerly Burma), North Korea, Quebec and Sudan”• This could and should have been phrased differently – e.g., In Canada … Elsewhere … 56
  57. 57. Contest for Kids & TeensGenerally • Quebec prohibits advertising to children under 13 • Advertising Standards Canada (ASC) has rules in its Canadian Code of Advertising Standards on advertising to children • Canadian Association of Broadcasters (CAB) has rules in its Broadcast Code for Advertising to Children (e.g., in ads the product must receive at least equal emphasis to contest) • CBC has guidelines for advertising to children under 12 57
  58. 58. Contests for Kids & Teens• No equivalent to US Children’s Online Privacy Protection Act (COPPA) and “verifiable parental consent” requirement• Do have Canadian Marketing Association (CMA) Guidelines for Marketing to Children and Teenagers • Special considerations for protecting privacy of children under 13 years and teenagers 58
  59. 59. Contests for Kids & Teens• CMA Guidelines – Kids Under 13 • A marketer may collect personal information (PI) - defined as “information about an identifiable individual” - from kids under 13 without obtaining parent’s express consent only if the marketer: • collects and uses only PI needed to determine winner • does not transfer PI to any 3rd party • deals only with winner’s parent at end of contest • does not retain PI after contest ends 59
  60. 60. Contests for Kids & Teens• CMA Guidelines – Kids Over 13 & Under 16 • A marketer may • collect, use or disclose to 3rd party PI with express consent of parent • collect and use contact information (CI) with teenager’s express consent – CI is defined as a subset of PI considered “non- sensitive” and refers solely to an individual’s name, home address, e-mail address and/or telephone numbers • Disclose PI to 3rd party with express consent of parent . 60
  61. 61. Contests for Kids and Teens• CMA Guidelines – Teenagers Over 16 & Under Age of Majority • A marketer may collect, use or disclose to 3rd party all PI (including CI) with teenager’s express consent . 61
  62. 62. Contests involving special products – e.g., liquor• Most provinces/territories have special rules and approval processes administered by the applicable liquor regulatory authority for contests involving liquor• In Ontario, see AGCO’s Liquor Advertising Guidelines . 62
  63. 63. Contests involving special products – e.g., liquor • AGCO’s Liquor Advertising Guidelines • Apply to liquor licensees and manufacturers • Liquor may not form part of prize package (subject to certain exceptions) • An individual shall not be required to have at any time purchased or consumed the liquor product in order to participate in or qualify for a contest - e.g., a qualifying question cannot be about the taste qualities of the liquor product • But it may be about the packaging if this information could be gained easily without the purchase of the liquor product . 63
  64. 64. Contests involving special products – e.g., NHL tickets• Should get permission from at least team, which must manage its IP, sponsorships, category exclusivity arrangements, etc.• If playoffs, will likely need permission from NHL – a must if referring to “Stanley Cup”• If done with appropriate permissions (and payment of fees) can use team and NHL names, logos, trade-marks etc.• If not, run some risk of claims for passing off, interference with contractual relations, and trade-mark & copyright infringement . 64
  65. 65. Contests involving special products – e.g., NHL ticketsNational Hockey League vs. Pepsi-Cola Canada Ltd., BCCA, 1996• Contest sponsors may be tempted to rely on approach taken by Pepsi that withstood judicial scrutiny in this case where NHL sued Pepsi for implying a connection to the NHL by advertising during broadcasts of Hockey Night in Canada• NHL had granted Coca-Cola Ltd. the right to be the “official soft drink of the NHL”• NHL alleged Pepsi commercials caused confusion and sued Pepsi for passing off, trade-mark infringement and interference with contractual relations (even though the Pepsi commercials, among other things, didn’t use team or NHL logos or trade- marks and contained a disclaimer that the contest was not associated with NHL or any of its member teams) . 65
  66. 66. Contests involving special products – e.g., NHL ticketsNational Hockey League vs. Pepsi-Cola Canada Ltd., BCCA, 1996• Court rejected NHL’s claims on basis that: • there was no misrepresentation (so no passing off) • there was no trade-mark use (so no trade-mark infringement) • the NHL’s contract with Coke couldn’t allow them to prohibit lawful Pepsi ads (so no wrongful interference with contractual relations)• Case did not consider issue of NHL’s possible copyright in league’s schedule . 66
  67. 67. Contests involving special products – e.g. NHL ticketsNational Hockey League vs. Pepsi-Cola Canada Ltd., BCCA, 1996• But, since this case and for many years now, the conditions on the back of an NHL ticket (a revocable license to attend game) void ticket if used without permission as a prize in a contest. This condition appears on that back of tickets for most professional sports teams – e.g., Leafs, Raptors, TFC, Blue Jays . 67
  68. 68. Contests involving special products – e.g. NHL tickets TICKET BACK Ts & Cs IMPORTANT! PLEASE READ. WARNING! DESPITE ENHANCED SPECTATOR SHIELDING MEASURES, PUCKS STILL MAY FLY INTO THE SPECTATOR AREA. SERIOUS INJURY CAN OCCUR. STAY ALERT AT ALL TIMES INCLUDING DURING WARMUP AND AFTER PLAY STOPS. IF STRUCK, IMMEDIATELY ASK USHER FOR DIRECTIONS TO MEDICAL STATION. The Holder, on behalf of the Holder and minor accompanying the Holder (individually and collectively, the "Holder"), is admitted on condition and by using this ticket and entering the arena, agrees to be bound by all of the terms of this ticket license. The arena is a strictly enforced smoke-free environment. Bottles, coolers and containers of any kind are not allowed into the arena and may be confiscated. Tickets obtained from unauthorized sources may be lost, stolen or counterfeit and may not be honored. Tickets cannot be replaced if lost, stolen or destroyed. This ticket is a revocable license which may be withdrawn and admission refused at any time upon refunding Holder the printed purchase price. This license will automatically terminate if any term is breached. Ticket may not be offered for resale in any manner which would violate any law or regulation. Ticket may not be used for any form of commercial or trade purposes, including, but not limited to, advertising, promotions, contests or sweepstakes without the express written consent of Maple Leaf Sports & Entertainment Ltd. ("MLSE"). Holder assumes all risks of personal injury and all other hazards related to the event for which ticket is issued, whether occurring prior to, during or after the event including specifically but not exclusively danger of injury by hockey pucks, sticks and other equipment, by spectators or players, or by thrown objects. Holder agrees that MLSE, the arena, the NHL, the member clubs of the NHL, NHL Enterprises, L.P., the NHLPA and current and former players, and each of their affiliates, parents, related entities, owners, governors, officers, directors, partners, principals, employees and agents are expressly released by Holder from any claims arising from or relating to such causes or otherwise occurring at or in connection with event. Holder grants permission to the NHL (and its designees and agents) and MLSE to utilize the Holders image, likeness, actions and statements in any live or recorded audio, video, or photographic display or other transmission, exhibition, publication or reproduction made of, or at, the event (or activities carried on in connection therewith) in any medium or context without further authorization or compensation. Holder further agrees to abide by policies of MLSE, NHL, its member clubs, the arena and the instructions of arena personnel or shall be subject to revocation of the license created by ticket without refund. Any non-editorial or commercial use of any NHL or NHL club mark is prohibited without prior written approval of NHL. Any unauthorized transmission, picture or other depiction or description of any game action, game information or other arena activity is prohibited without prior written approval of NHL and MLSE. The Holder and the Holders belongings may be searched upon entry into the arena, and the Holder consents to such searches and waives any related claims that might arise against the NHL and MLSE. If the Holder elects not to consent to these searches, the Holder will be denied entry into the arena. 68
  69. 69. ONLINE CONTESTS Same General Canadian Contest Laws & PracticeApply Whether Contest Online, Mobile/Text or Offline 69
  70. 70. OnLine Contests – Even “RRRoll Up” Now Has An Online Element 70
  71. 71. Online Contests – Competition Bureau’s Guidance • See Bureau’s Information Bulletin on Application of Competition Act to Internet • Required Disclosures – Basic Rules • In contests designed to promote a product or business interest, adequate and fair disclosure must be made of certain information, including facts which materially affect the chance of winning • This information must be displayed in such a way that it is likely to be read, which depends in part on the format and design of the website, Facebook page, etc. 71
  72. 72. Online Contests – Competition Bureau’s Guidance • Required Disclosures – Basic Rules • A notice of a contest should not require readers to take an active step, such as sending an e-mail or placing a phone call to receive the required information • Bureau does not consider clicking on a clearly labelled hyperlink to be an “active step” – i.e., the “one-click-away” rule of thumb • In instances where the information is so critical that it is an integral part of the representation, it may not be appropriate to use a hyperlink to a separate page • In these cases, it should be possible to read the representation and the required disclosure at the same time 72
  73. 73. Online Contests – Competition Bureau’s Guidance • Required Disclosures – Basic Rules • Contest rules should be placed so that entrant does not have to negotiate a complicated website, purchase additional software, or visit an additional site to find the relevant information 73
  74. 74. Online Contests – Competition Bureau’s Guidance • Online Disclosure of Contest Mini-Rules and Full Rules • Where contest website has full rules accessible via hyperlink (i.e., no “active step” required, just one-click away), probably don’t need to disclose mini-rules • Still, as a “gold standard”, the mini-rules could appear prominently on the contest home page or at least be visible when a visitor hovers their cursor over the “Contest Rules” button • The full rules need not appear directly on the contest home page but must be accessible via a single click on the “Contest Rules” button. 74
  75. 75. Online Contests – Competition Bureau’s Guidance • Liability for Internet Representations • The deceptive marketing practices provisions of Competition Act attribute liability to the person who has caused the representation to be made – i.e., the person who makes or permits it to be made • In online environment, Bureau will consider the respective roles of the various parties involved in an advertisement including the web page/app designers (who help create the representations), the web hosts (who own or operate the services from which the representations are disseminated), the service providers (who provide access to the Internet) and, of course, the businesses (on whose behalf the representations are made and disseminated) 75
  76. 76. Online Contests – Competition Bureau’s Guidance • Liability for Internet Representations • A determination of who should bear responsibility is made on a case-by- case basis • One guiding principle the Bureau considers is the nature and degree of control that the person who makes the representation exercises over the content 76
  77. 77. Online Contests and UGC RiskMain Concerns • Sponsors should use website terms of use, contest rules, entry forms and guides, and sponsor’s administration of contest to protect 3rd party copyrights, trade-marks and goodwill and thereby reduce risks of 3rd party claims for: • IP infringement (e.g., radio, TV, posters in background, logos on clothing, etc.) • trade defamation/commercial disparagement – i.e., don’t encourage entrants to bash your competitors 77
  78. 78. Online Contests and UGC RiskMain Concerns • Get rep & warranty and indemnity from entrant that submission is original and does not infringe any 3rd party IP rights • Get IP rights from all participants in UGC (i.e., if video, remember both sides of camera), not just entrant • Ideally, if practical, get proper assignment of copyright in content submitted by entrant • Note – This still requires a signed hardcopy under current Canadian copyright law 78
  79. 79. Online Contests and UGC RiskMain Concerns • Where getting signed hard copy not practical, get non-exclusive licence of copyright online via click-through agreement or other means – no signed hard copy statutory requirement • Should also get waiver of moral rights • Consider limiting participants to age of majority (or at least get parent to sign assignment/license, release and declaration forms where minors participate), as minors can’t sign legally binding agreements 79
  80. 80. Online Contests and UGC RiskMain Concerns • Rules and associated contest documents must prohibit use of 3rd party materials (or at least “unauthorized use” – sponsor may obtain permission to use certain 3rd party IP – e.g., select songs – for entrants to use in their submissions) • Should establish and follow “community standards” (CS) and “take down” policy for infringing, defamatory, pornographic, misleading or otherwise inappropriate UGC • At outset of contest, sponsor should provide entrants with a detailed user-friendly guide on how to make their video – what’s acceptable & what’s not 80
  81. 81. Online Contests and UGC RiskMain Concerns • Through moderators, sponsor should screen UGC for 3rd party IP material before posting and provide simple, accessible mechanism for public to flag offending material • Again, entries that violate the prohibition on using 3rd party materials or otherwise violating CS must be removed and disqualified by sponsor 81
  82. 82. The “Quiznos vs. Subway TV Challenge”, 2006 • Contestants were invited to submit videos proclaiming that “Quiznos was better than Subway” • The contest rules expressly prohibited deceptive statements and gave Quiznos the authority to review and exclude contest entries containing inappropriate content but • Quiznos used the domain name “” (arguably a literal falsity because it implied that Subway sandwiches contained no meat) • The 4 sample videos created by Quiznos to shape the contestant entries arguably contained deceptive claims implying that Subway sandwiches had no meat or less meat than Quiznos sandwiches 82
  83. 83. Selected UGC from 2006 Quiznos Contest“The Mr. Sandwich Championships”“Subway Sucks”“The Quiznos-Subway Song” 3E72F4E607 83
  84. 84. Quiznos’ “Quiznos vs. Subway TV Challenge”, 2006 • Shortly after the launch of video contest, Subway sued Quiznos for deceptive advertising and court battle ensued that eventually settled in 2010 • Should caution online advertisers to be mindful of risks associated with soliciting UGC especially regarding liability for deceptive advertising and particularly with regard to solicitation of video content for a contest • Sponsor can mitigate risks by giving proper direction by way of submission requirements, examples, judging criteria and contest rules 84
  85. 85. Personal Information (PI) and Privacy RiskCanadian Privacy Laws –PIPEDA and Its Provincial Counterparts • Informed consent is required for a contest sponsor’s collection, use and disclosure of an entrant’s PI • Special privacy law concerns in online environment given huge amount of PI that can be collected and the ease with which it can be cross-referenced, used and shared • Even with entrant’s informed consent, must limit collection, use and disclosure of PI to purposes that a reasonable person would consider appropriate in the circumstances 85
  86. 86. Personal Information (PI) and Privacy RiskCanadian Privacy Laws –PIPEDA and Its Provincial Counterparts • PI may be used only for purpose for which it has been collected • No need for contest sponsor to get entrants’ express consent to collect & use PI solely to administer the contest (as such consent can reasonably be implied from act of entering contest) • Any other purpose (e.g., newsletter distribution, secondary marketing, consumer research etc.) should be specified in the PI & privacy consent clause in the contest rules and contest entry form/mechanism 86
  87. 87. Personal Information (PI) and Privacy RiskCanadian Privacy Laws –PIPEDA and Its Provincial Counterparts • Refer-a-friend contests can raise tricky privacy issues • The Privacy Commissioner of Canada has said that organizations that actively solicit non-users’ email addresses from users with the intention of using them for their own purposes must take some responsibility for obtaining consent of the non-users • For refer-a-friend contests, this statement suggests that the contest sponsor should make sure entrants know that they must not disclose their friend’s email address unless they know the friend personally and the friend would want to get an e-vite to enter the contest 87
  88. 88. Personal Information (PI) and Privacy RiskCanadian Privacy Laws –PIPEDA and Its Provincial Counterparts • If more than one email will be sent to the friend (for example, reminder emails) that information must be disclosed to the user so that the user can consider whether that use of their friend’s email address would be appropriate • This information should also be disclosed to the friend (in the initial email that is sent to them) • If the friend objects to the use of their email address, they should be given a simple way of opting out of further communications (in effect, withdrawing their implied consent) 88
  89. 89. Personal Information (PI) and Privacy RiskCanadian Privacy Laws –PIPEDA and Its Provincial Counterparts • The contest sponsor will not have consent to send the friend any further communications (again, other than possibly one reminder email) to enter the contest, until the recipient takes a positive step and enters the contest • Until such a positive step has been taken, the contest sponsor must keep the friend’s email address separate from the database for contest entrants 89
  90. 90. CASL and Refer-A-Friend Risk• CASL now likely not to be in force until at least Q1 2013• CONSENT – CASL prohibits sending a commercial electronic message (CEM) to an electronic address of persons who have not provided express or implied consent 90
  91. 91. CASL and Refer-A-Friend Risk• Implied consent is permitted only where • there is an existing business or non-business relationship between sender and recipient • the recipient has conspicuously published their address or has disclosed it to sender and • has not indicated they don’t want to receive CEMs and • the message is relevant to recipient’s business 91
  92. 92. CASL and Refer-A-Friend Risk• PRESCRIBED INFORMATION – CEMs must contain prescribed information identifying the sender as well as an unsubscribe mechanism 92
  93. 93. CASL and Refer-A-Friend Risk• CASL will have an impact on refer-a-friend contests in that CASL does not apply to a CEM sent “by or on behalf of an individual to another individual with whom they have a personal or family relationship”• The definitions of “family relationship” and “personal relationship” in the draft CASL Regs have raised concerns among marketers and legal commentators 93
  94. 94. CASL and Refer-A-Friend Risk• The “family relationship” definition is straight forward and intuitive enough – although it has an obvious typo in it that will likely be corrected in the final CASL Regs – i.e., individuals connected by blood, marriage, common law partnership and* adoption * The “and” should be an “or” • Interestingly, “blood relationship” is limited to children, siblings, parents, grandparents or collateral descendants of a common grandparent • In other words, a person could send an unsolicited CEM to their aunt but could not send such a message to their great aunt or second cousin without possibly running afoul the proposed CASL Regs 94
  95. 95. CASL and Refer-A-Friend Risk• The “personal relationship” definition has been criticized as being too technical and limited and out-of-step with the way people communicate today. It requires that, regarding the recipient, the sender must • have had an “in person” meeting • have had a “two-way communication” within the last two years • not be in a commercial relationship 95
  96. 96. CASL and Refer-A-Friend Risk• The “personal relationship” requirements have caused some commentators to muse whether • the meeting must be “physically” in person (i.e., face-to-face) or whether a virtual in-person meeting - e.g., through Skype or video conference - qualifies under the exception • the “two-way communication” must have occurred at a time other than the “in-person meeting” (presumably this is the case as the definition says “and”) • the personal relationship definition includes “friends” who you have never met in person but with whom you have communicated for years by snail mail (i.e., the traditional long distance pen pal), telephone and email, and are “friends on Facebook” 96
  97. 97. CASL and Refer-A-Friend Risk• These definitions of family and personal relationships will require online marketers to alter some of their refer-a-friend contests because contest sponsors cannot incite individuals to forward marketing messages to persons who do not fall under these definitions• CASL s. 9 prohibits inducing a breach of the consent requirements in CASL s. 6• It is therefore incumbent on the contest sponsor to clarify for entrants that they should only give the names and personal email addresses of persons who meet the prescribed definitions under the CASL Regs 97
  98. 98. CASL and Refer-A-Friend Risk• The contest sponsor should not incite the entrant to send a CEM to all of their friends on Facebook as this would most likely include individuals who fall outside the permitted classes under the CASL Regs• Other suggestions to reduce CASL refer-a-friend compliance risk include: • include the name of the person who caused the referral to be sent in the message • use any “friend” address to send only one referral message (and possibly one follow-up reminder message), unless they provide consent for further messages• Moreover, there is a defense under CASL (in ss. 33(1) and 46(2)) that permits anyone accused of a violation to establish they exercised “due diligence” to prevent the offence 98
  99. 99. Cheaters - Hacked PIN Code Risk• Without more, weak alphanumeric PIN codes on product packages awarding instant prizes can be fairly easily broken• Hackers set up a computer program to enter codes until the winning PINs are hit• Clearly the contest rules should disqualify such cheaters 99
  100. 100. Cheaters - Hacked PIN Code Risk• Some technological ways to make the PIN codes stronger and thus less susceptible to hacking include • make the alphanumeric code case sensitive and at least 10 strokes long • insert a CAPTCHA (that is revised often) so the PINs cannot be entered robotically • require registration of personal information before person enters code 100
  101. 101. Cheaters - Voter Fraud Risk• Mass voting fraud may take many forms including entrants (and often their friends or bribed strangers) • Nasty Stuff • setting up multiple email accounts to vote repeatedly • voting repeatedly by resetting their IP address (by unplugging their modems or using unsecured Wi-Fi networks) • hiring private companies to recruit votes • Really Nasty Stuff • voting repeatedly from the same IP address for competitors … to get competitors disqualified 101
  102. 102. Cheaters - Voter Fraud Risk• “How-To Guides” for voter fraud readily available online 102
  103. 103. Voter Fraud – On-line Guides 1.2337140 votes-for-online-voting-contests/ 103
  104. 104. Voter Fraud – Also Very PrevalentESPN’s College GameDay Contest – April 2012 halted-after-massive-ballot-box-stuffing 104
  105. 105. Voter Fraud – Not to Be IgnoredThe Ontario Tourism Marketing Partnership Contest, 2011 cheating/ 105
  106. 106. Cheaters - Voter Fraud Risk• How to Manage • Contest rules must prohibit systematic voting from same computer/IP address, automated voting and voter bribing • Consider including voting limits – i.e., one vote per address • As with mitigating hacked PIN risk • Include CAPTCHA • Require registration of personal information • Deploy technology to detect voter fraud and disqualify entrants engaged in it 106
  107. 107. Cheaters - Voter Fraud Risk• How to Manage • If leader board, use bar graphs to show relative position of entrants (not specific number of votes) • During contest period, scrub votes for voter fraud daily in evening and re-set true vote tallies daily in the morning • During final stage of contest (e.g., last 2 days in 4 week contest period), take down the public vote tally (may lose some of the buzz around the contest but may reduce risks of derailing contest with last minute voter fraud) 107
  108. 108. Cheaters - Voter Fraud Risk• How to Manage • Consider multi-stage process for selecting winner • Initial stages - public votes determine who advances • Final stages – using objective criteria, contest sponsor’s judges select winner from finalists as voted by public 108
  109. 109. Global Contests and Local Law Risks• Since Internet is global, sponsor must specify eligibility, otherwise contest may be seen as open to everyone• Moreover, sponsor may unwittingly violate laws in foreign jurisdictions that require contests to be pre-registered for a fee paid to the local contest regulatory body (as is required in Quebec). In the US, these jurisdictions include Florida, New York and Rhode Island• Further, there are several jurisdictions in the US that have extensive and not necessarily harmonized registration, disclosure and other requirements for contests – i.e., may therefore want to exclude residents from these jurisdictions (as is sometimes done with Quebec residents)• Also the Canadian contest law STQ requirement is foreign to US law – in fact, can’t have STQ for US contestants 109
  110. 110. Global Contests and Local Law Risks• Other jurisdictions that have special contest rules include the UK, Australia, France, Germany and Turkey• Takeaway - Sponsor should not “go global on a wing and a prayer” .• If contest to include many jurisdictions around the world, then sponsor must determine where contest to be run and should obtain legal clearance/registrations (if applicable) in each jurisdiction • Should also specify time zone which applies to any deadlines established by the rules 110
  111. 111. Global Contests and Local Law Risks• If only Canadian residents eligible, then include prominently on the contest home page and in the contest rules disclaimer along following lines: THIS CONTEST IS OPEN TO CANADIAN RESIDENTS ONLY AND IS GOVERNED BY CANADIAN LAW 111
  112. 112. Contests on Facebook – Special Considerations 112
  113. 113. Contests on Facebook – Special Considerations• Facebook Terms and Policies (last revised June 8, 2012) • Statement of Rights and Responsibilities • “You must follow our Promotions Guidelines and all applicable laws if you publicize or offer any contest, giveaway or sweepstakes (“promotion”) on Facebook” – s. 3(9) • “Your ads will comply with our Advertising Guidelines” – s. 11(4) 113
  114. 114. Contests on Facebook – Special Considerations• Facebook Terms and Policies (last revised June 8, 2012) • Facebook Pages Terms – Promotions: General • Puts onus on sponsor for lawful operation of contest • Refers specifically to sponsor’s obligations to comply with all requirements for contest rules, age and residency restrictions, prizing, registering and obtaining necessary regulatory approvals • Urges you to consult an expert 114
  115. 115. Contests on Facebook – Special Considerations• Facebook Terms and Policies (last revised June 8, 2012) • Facebook Pages Terms – Promotions: Specifics • Contests on Facebook must be administered within Apps on, either on a Canvas Page or a Page App • Contests must include the following • A complete release of Facebook by each entrant or participant • Acknowledgement that the contest is in no way sponsored, endorsed or administered by, or associated with, Facebook • Disclosure that the participant is providing information to the sponsor and not to Facebook 115
  116. 116. Contests on Facebook – Special Considerations• Facebook Terms and Policies (last revised June 8, 2012) • Facebook Pages Terms – Promotions: Specifics • You must not condition registration or entry upon the user taking any action using Facebook features or functionality other than liking a Page, checking in to a Place, or connecting to your app. For example, you must not condition registration or entry upon the user liking a Wall post, or commenting or uploading a photo on a Wall • You must not use Facebook features or functionality, such as a Like button, as a voting mechanism for a contest 116
  117. 117. Contests on Facebook – Special Considerations• Facebook Terms and Policies (last revised June 8, 2012) • Facebook Pages Terms – Promotions: Specifics • You must not notify winners through Facebook, such as through Facebook messages, chat, or posts on profiles (timelines) or Pages • We reserve the right to reject or remove Pages for any reason. These terms are subject to change at any time 117
  118. 118. Contests on Twitter – Special Considerations 118
  119. 119. Contests on Twitter – Special Considerations• Twitter Terms of Service and Twitter Rules (last updated May 17, 2012) • Like Facebook’s constantly evolving • But not as detailed as Facebook’s • Has established guidelines for contests hosted by sponsors through their Twitter profile 119
  120. 120. Contests on Twitter – Special Considerations• Guidelines for Contests on Twitter – General • Contests on Twitter may offer prizes for doing various things including (a) tweeting a particular update, (b) for following a particular user, or (c) for posting updates with a specific hashtag • Guidelines are intended to help ensure sponsor doesn’t ask anyone to violate any of Twitter’s rules or guidelines 120
  121. 121. Contests on Twitter – Special Considerations• Guidelines for Contests on Twitter – Specifics • Discourage the creation of multiple accounts • If users make lots of accounts to enter a contest more than once, they’re liable to get all of their accounts suspended • Contest rules must state that anyone found to use multiple accounts to enter will be ineligible • Discourage posting the same tweet repeatedly • Posting duplicate, or near duplicate, updates or links is a violation of the Twitter Rules and jeopardizes search quality • Don’t say “whoever retweets this the most wins” • Contest rules should state that multiple entries in a single day will not be accepted 121
  122. 122. Contests on Twitter – Special Considerations• Guidelines for Contests on Twitter - Specifics • Ask users to include an @reply to you in their update so you can see all the entries • This allows you to see all contestants in your Mentions timeline when it comes to picking a winner • Just doing a public search may not show every single update, and some contestants may be filtered from search for quality • Encourage the use of topics relevant to the contest • You should have users include relevant hashtag topics along with the updates (like #contest or #your company name). • Hashtag topics need to be relevant to the update. Encouraging users to add your hashtag to totally unrelated updates might cause them to violate the Twitter Rules 122
  123. 123. Managing Contest Risks• Various Means • Promotional Partnership Agreements (e.g., dealing with items such as contest administration, ownership of advertising material, protection of privacy and use of contest databases) • Risk Management Processes and Products (e.g., risk awareness, communication, tracking and audit, prize security and insurance, draw adjudication, winner validation) 123
  124. 124. Managing Contest Risks• Various Means • Winners Declaration and Release (e.g., confirms in writing that winner has complied with contest rules, releases contest sponsor from liability associated with prize, confirms contest sponsor’s right to publicize winner’s information) • Contest Rules (not just to comply with “adequate and fair” disclosure requirements mandated by contest law, but also to provide contractual protections for contest sponsor vis-à-vis contest entrants and winners) 124
  125. 125. Managing Contest Risks• Contest Rules – Contractual Protections • All decisions of sponsor/independent judging organization are final and binding • Sponsor reserves right to cancel or modify contest if it determines that contest can’t be run as originally planned or if fairness or integrity of contest compromised • Sponsor may substitute prizes of equal value if original prizes can’t be awarded 125
  126. 126. Managing Contest Risks• Contest Rules – Contractual Protections • If there are more potential winners than contemplated in contest rules, then there will be a draw amongst all eligible prize claimants after contest close date to award correct number of prizes (so-called “Kraft clause”) • Other key clauses for rules include: glitch disclaimer (i.e., sponsor not responsible for damages and that contest may be cancelled/modified), eligibility (age and residency requirements); privacy consents (reiterate in entry form); and liability and publicity releases and indemnities (reiterate in winner’s declaration and release) 126
  127. 127. Wrap-Up• Avoid common hazards• Address regulatory concerns• Address contractual concerns• Skipping legal advice may be false economy 127
  128. 128. Questions 128
  129. 129. Thank You Bill Hearn – 416.369.5298 Darren Kirkwood – 416.815.6094 Disclaimer: This presentation contains general information only and does not constitute legal advice. Qualified legal counsel should be consulted to assess the application of laws to specific facts.Doc. 11667106.1 129