Marketing through social media, broadly defined as any form of online marketing that permits consumers to interact with the advertiser, has, over the last decade, become an integral part of any broad-based marketing campaign. Through Facebook, Twitter and similar applications, gaming operators can provide their “fans” or “followers” with information about their products, services, deals and promotional events, and receive instant feedback from consumers that provides opportunities to fix problems and tailor offerings to meet the expectations of the marketplace.
Along with these benefits of interactivity, however, come a wide range of legal risks and challenges, including specific concerns that must be addressed if the advertiser is involved in the gaming industry in Canada.
Territorial Limitations
Section 207 of the Criminal Code creates specific exemptions from the generally applicable criminal prohibitions against gaming and betting. The two most important exemptions are ss. 207(1)(a) and (b) of the code, which allow the conduct and management of a “lottery scheme” by (a) provincial governments and their agents, such as provincially owned lottery corporations; and (b) charities and religious organizations licensed by a provincial government. A “lottery scheme” is a broadly defined term that captures nearly every form of gaming or betting.
The precise phrase used in both s-ss. 207(1)(a) and (b) is “to conduct and manage a lottery scheme in that province” (emphasis added). This is read in conjunction with two other provisions, s-ss. 207(1)(e) and (f), which explicitly permit (i) interprovincial sales of lots, cards or tickets of a lawful lottery schemes where intergovernmental agreements permit same; and (ii) individuals and businesses assisting in the conduct of such interprovincial lottery schemes pursuant to licenses issued by the provincial governments.
The territorial limitations imposed by these provisions have an obvious impact on the use of social media in advertising for such lottery schemes. Provincial lottery corporations are limited in their ability to advertise and market their products and services using social media if they cannot accept “fans” and “followers” from outside their home provinces.
In 2002, the provincial government of Prince Edward Island sought the opinion of the court as to whether it had the authority to license the Earth Future Lottery, a proposed charitable lottery to be conducted under ss. 207(1)(b), with tickets being advertised, marketed and sold throughout Canada and the rest of the world over the Internet. The Prince Edward Island Court of Appeal ruled that without the benefit of the agreements and consents referred to in s-ss. 207(1)(e) and (f), “extra-provincial and international lottery sales transactions are not permitted” by ss. 207(1)(b). Furthermore, in such circumstances “soliciting offers to purchase from persons located outside [Prince Edward Island] would … be illegal.” Referring specifically to “extra-provincial marketing of a s-s 207(1)(b) lottery scheme,” the Court of Appeal stated that s-ss. 207(1)(e) and (f) “were intended to regulate interprovincial lottery marketing and to prevent poaching. Parliament did not want a province subjected to lotteries unless it chose to be.” In the absence of an agreement authorizing the marketing of a s-s. 207(1)(b) lottery scheme in a province other than the one that granted its license, such extra-provincial marketing would give rise to an offense under the Criminal Code. The Supreme Court of Canada upheld the decision of the Court of Appeal “for substantially the reasons of” the Court of Appeal.
A charity licensed to conduct a terrestrial lottery scheme under s-s. 207(1)(b) accordingly cannot invite its Facebook fans or Twitter followers to visit its home province for the purpose of participating in its lottery scheme. Facebook and Twitter accounts do not verify the physical residence of their account holders; indeed, many accounts are held under pseudonyms. The charity could at any time be marketing the lottery scheme to persons located in other provinces of Canada. This would be “poaching” as that term was implied to be defined by the Prince Edward Island Court of Appeal: “interprovincial lottery marketing” conducted without the benefit of an interprovincial agreement or consent set forth in s-ss. 207(1)(e) and (f).
There is considerable debate over which territorial limitations apply to a provincial lottery corporation marketing a s-s. 207(1)(a) lottery scheme, since the decision of the Prince Edward Island Court of Appeal applied solely to a s-s. 207(1)(b) lottery scheme. The Criminal Code was clearly enacted to “regulate interprovincial lottery marketing and to prevent poaching.” It is equally clear that “Parliament did not want a province subjected to lotteries unless it chose to be.” So the Parliamentary intent to prevent interprovincial activity is equally applicable to lottery schemes conducted under s-s. 207(1)(a) and those conducted under s-s. 207(1)(b). However, Parliament did not express an intention to restrain the provincial governments, which have the innate authority to conduct business internationally, from conducting lottery schemes outside of Canada. In fact, such activity is not “poaching” defined by the Prince Edward Island Court of Appeal.
In any event, the problem remains the same in relation to both the s-ss. 207(1)(a) and (b) lottery schemes: When marketing to Facebook fans and Twitter followers, there is no reliable way for a provincial lottery corporation or a licensed charity to know where its audience is located. They may well be located in other provinces of Canada, which are protected markets under the Criminal Code. Accordingly, in the absence of the interprovincial agreements or consents described in s-ss. 207(1)(e) and (f), social media marketing that directly “pushes” a lottery scheme should be limited to directing the public to websites that are by their terms clearly restricted to persons within the territory served by the conductor of the lottery scheme.
Offshore I-Gaming
Canadian residents are also customers of online gaming and betting (i-gaming) operators who provide services from outside Canada in a manner not permitted by any provision of s. 207 of the Criminal Code. Many of these offshore i-gaming operators market their services to the world at large, using social media accounts among other methods.
Advertising such i-gaming through social media will likely result in advertising to Canadians, as operators will not know the true locations and identities of their fans and followers. A number of the offenses in the Criminal Code apply specifically to the marketing and advertising of betting and gaming, and since many offenses are expressed in technologically neutral language, they could apply to i-gaming. Advertising for i-gaming based outside of Canada may be subject to prosecution under the Criminal Code if it has a “reasonable and substantial connection” to Canada. Professor Michael Geist has observed that the jurisprudence in Canada concerning jurisdiction over online activity is moving toward a “targeting” analysis, in which an online commercial operation based outside of Canada that directs its attention to people in Canada is anticipating and even encouraging the participation of Canadian residents, and therefore should reasonably expect that it will be subject to Canadian law. This rationale may also extend to an online operator who has reason to believe that persons in Canada are participating in its online activities and who takes no active steps to exclude them.
On these principles, advertising for i-gaming that requires payment from players and that is received in Canada could be subject to prosecution, but there is little evidence that law enforcement authorities consider the matter a priority. In 2007, a law was enacted in Ontario that was specifically directed against advertising for i-gaming. While this law was largely duplicative of the existing prohibitions in the Criminal Code, it nonetheless opened up a parallel avenue through which activities presently prohibited by the code might be prosecuted. This law took effect on Jan. 1, 2008, and yet we are unaware of a single prosecution that has been initiated under it in Ontario and in the three and a half years since.
If Canadian law enforcement adopts a policy of attempting to enforce the Criminal Code in these matters, the first enforcement efforts would likely take aim at operators and advertisers that have representatives or assets present in Canada against which action could easily be taken.
Provincial Advertising Policies
Where a company is registered as a supplier with one or more of the provincial gaming commissions in Canada, its use of social media must conform with the advertising and marketing standards set out by those gaming commissions.
Generally speaking, social media use that advertises gaming-related products and services will comply with provincial standards where such advertising and marketing:
1) contains a responsible gaming message, whenever reasonable and appropriate;
2) clearly states the odds of winning and makes those odds available to the public upon request, through relatively accessible means;
3) does not present winning as the most probable outcome or misrepresent the chances of winning;
4) describes prize amounts accurately;
5) does not encourage people to play or bet beyond their means;
6) does not imply that gaming or betting will bring certain financial reward or alleviate personal and financial difficulties;
7) does not present gaming or betting as an alternative to employment or as an investment;
8) does not encourage playing or betting as a means of recovering past gaming or other financial losses;
9) does not imply that the chances of winning increase the longer one plays;
10) does not suggest that skill can influence the outcome;
11) does not depict a preoccupation with gaming or betting;
12) is not knowingly placed in, or adjacent to, other media that depicts the inappropriate use of the products or services;
13) does not use individuals who are, or appear to be, minors (persons under the age of 19) to promote gambling;
14) does not appear in media or venues directed primarily to minors, or where most of the audience is reasonably expected to be minors;
15) is not based on themes or use language, cartoon figures, symbols, role models, and/or celebrity/entertainer endorsers that are intended to appeal primarily to minors; and
16) does not promote gaming or betting in the course of entertainment whose primary audience is expected to be minors.
General Application Issues
There are also a wide variety of laws applicable to all forms of advertising on social media that may create liability for gaming operators if the social media campaign is not crafted with an awareness of these legal issues. Canadian or provincial privacy legislation regulates how one may lawfully collect, use and disclose personal information collected from fans and followers. The federal Competition Act has been amended to account for electronic communications, such that false or misleading advertising or deceptive marketing practices carried out over social media are actionable. The Competition Act, case law under the Criminal Code, and Quebec provincial legislation set out the permissible format for contests and sweepstakes carried out through social media where Canadians are permitted to enter such contests and sweepstakes. New anti-spam laws regulate when advertisers are permitted to send unsolicited commercial communications to Canadians. The company must consider the circumstances in which it may be held responsible for copyright infringement or defamation where their social media campaign provides a platform for communications that give rise to complaints.
These are just a sampling of the many issues that may arise from a company’s use of social media as a marketing tool. Carefully drafted terms of use, technical measures and monitoring of social media, all brought together in a comprehensive social media policy, can provide a great deal of comfort in addressing these matters, as long as that policy is itself monitored and updated. The laws in this area are subject to frequent change as lawmakers continue to try wrapping their heads around new media.
Good legal advice can be a key factor in protecting the brand of a company involved in the highly regulated field of gaming, regardless of whether the company is a provincial lottery commission, a licensed charitable gaming organization, a registered gaming supplier or an offshore entity that interacts with Canada solely over the Internet.
Michael D. Lipton is a senior partner at Dickinson Wright LLP, based in Toronto, and heads the Canadian gaming law group. For more than 20 years, he has served as senior counsel on several gaming law matters. He regularly represents governments, gaming equipment suppliers/manufacturers, racetracks, casinos and pari-mutuel operators in all aspects of gaming law.
Kevin J. Weber is a partner in Dickinson Wright LLP. Weber is a prolific author and speaker on gaming regulatory law and Internet law. He is a member of the IMGL and has been recognized in Chambers Global. In his practice, he guides clients through compliance issues with provincial gaming regulators and provides opinions on all varieties of matters relating to the lawful operation of gaming and betting, both land-based and online.
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