Can a prize promotion be run where there is an element of chance in the selection of the winner?
A sweepstake is considered a lottery under the Gambling Act and as such will be permitted as a prize promotion if it meets the criteria of a 'sales promotion scheme' (defined in section regarding skill based competitions). Otherwise, the gambling will normally be unlawful unless the proceeds are applied or distributed for 'authorised purposes' which include a charitable purpose, a non-commercial purpose which is beneficial to the community, race meetings under the Racing Act 2003 or an electioneering purpose. Also, a license may be required from the Department of Internal Affairs, depending on the total value of the prizes and the turnover of the gambling.
Where a product purchase is not required and no other entry fee is paid to enter a prize draw, a license or permit is not required. This is because the entrant is not 'paying or staking consideration seeking to win money' and as such it does not amount to gambling. However, the Fair Trading Act would continue to apply (as above).