Popsicle promo meltdown

In what has turned out to be an expensive promotion, Popsicle Industries has been fined $200,000 under the Competition Act for 'unduly delaying' the delivery of prizes.Popsicle's problems with its Popsicle Pete Nintendo Powerstix promotion demonstrate the risks of promotions with...

In what has turned out to be an expensive promotion, Popsicle Industries has been fined $200,000 under the Competition Act for ‘unduly delaying’ the delivery of prizes.

Popsicle’s problems with its Popsicle Pete Nintendo Powerstix promotion demonstrate the risks of promotions with unlimited prize liability.

The size of the fine, a record for an offence under the contest provision, demonstrates the particular risks involved in promotions directed at children.

Participants in the 1990-91 promotion were encouraged to collect specially marked Popsicle sticks with varying point values.

For 15,000 points, they could claim their choice of one of three Nintendo game cartridges.

Response to the offer was overwhelming. The predicted redemption rate of 1,190 was a significant underestimation.

Popsicle had difficulties getting the extra cartridges it needed at a reasonable price. It did, however, manage to distribute more than 3,500.

For the 7,500 remaining claims, Popsicle relied on its right, stated in the promotion rules, to substitute premiums of equal or greater value.

It sent our certificates, which were redeemable for other merchandise, or which could be used in a promotion planned for the next year.

While 3,000 claimants accepted the alternative offer, 4,500 did not.

A number of those, likely parents of children who had diligently collected sticks, complained to Consumer and Corporate Affairs and charges were laid under the Competition Act, including charges under the contest section.

Although the offer was not a typical contest, it came under the contest requirements of the act because the point value given to a participant was determined by chance.

Popsicle pled guilty in December 1992. At that time, it agreed with Consumer and Corporate Affairs to redeem the outstanding certificates for game cartridges and to advertise broadly its undertaking to do so.

The requirement to make good on the premium redemption, plus the whopping fine may seem pretty harsh.

After all, any promotional offer could have an unexpectedly high response. If it had handled the situation differently, however, Popsicle may have avoided charges.

According to the agreed statement of facts filed in court, even when it became apparent that it was going to have difficulty fulfilling the claims, Popsicle continued to advertise the promotion on point-of-sale materials.

Further, according to the statement, the substitute premiums offered to participants were ‘inequitable,’ presumably a factor in complaints being made to Ottawa in the first place.

The moral of the story? If you decide to run a promotion with unlimited prize liability, take particular care with the rules.

If things start going wrong, remember you made a promise to your customer.

If you cannot deliver despite your best intentions, handle the situation in a way which will leave that customer satisfied.

Do not multiply the promises you have to keep by continuing to advertise.

Finally, consider obtaining insurance to cover the cost of prize claims which exceed the expected redemption rate.

Victoria Watkins is a lawyer in the Intellectual Property Group of Blake, Cassels & Graydon.