Joanne Kong outlines the key legal principles businesses should consider before launching a promotional campaign in Malaysia.
Promotions are often seen as essential by businesses to increase sales, improve customer engagement and raise brand awareness. Lucky draws, scratch-and-win promotions, contests and giveaways have become common marketing tools across many industries. However, businesses should be aware that not every promotional mechanic is legally permissible in Malaysia.
If not structured carefully, a promotion may inadvertently fall within the definition of an unlawful lottery or gaming activity under Malaysian laws, exposing organisers to criminal liability. While there is no standalone legislation regulating commercial promotions, the legality of a promotion depends largely on whether it contains elements of chance coupled with consideration.
The Legal Framework
The primary legislation governing promotional contests are the Common Gaming Houses Act 1953 (“CGHA”) and Lotteries Act 1952. Under these acts, a “lottery” generally refers to any method whereby money or money’s worth is distributed depending upon chance, while “gaming” refers to games involving chance or a mixture of chance and skill played for money or money’s worth.
Section 4(1)(h) of the CGHA further makes it an offence to conduct a competition connected with a trade or business where prizes are offered based on: (a) forecasting the results of a future event or of a past event the result of which is not yet ascertained or not yet generally known; or (b) competition success does not depend to a substantial degree upon the exercise of skill.
The Key Elements
The Ministry of Finance has published Guidelines on Commercial Promotional Contests (“Guidelines”) which provide that whether a promotion is considered as a lottery or gaming generally depends on the presence of the following 3 elements:-
(1) Distribution of prizes;
(2) Selection of winners based on chance or luck; and
(3) Contribution made by participants, whether direct or indirect.
Where all the above 3 elements are present, there is a significant risk that the promotion may be regarded as an unlawful lottery or gaming.
The Ministry of Finance no longer issues confirmation letters or approvals confirming whether a proposed promotion complies with the law. Businesses are expected to conduct their own risk assessment or obtain independent legal advice before launching a promotional campaign.
Promotions That Are Generally Prohibited
The Guidelines provide several examples of promotional mechanics that should be avoided:-
(a) Lucky draws
Customers who spend above a specified amount are given a chance to draw a coupon or “ang pow”, with different customers receiving prizes of different values purely by luck. Although every participant receives a prize, the value of the prize is determined by chance. This is thus not permitted. Similarly, promotions where coupons of varying value are randomly inserted into product packaging, or where customers enter a random lucky draw after making a purchase, are also identified as prohibited examples.
(b) Random tie-breakers
Businesses often require participants to answer simple questions correctly before selecting winners as an attempt to introduce an element of skill in the promotion mechanics. However, selecting a ballot at random without examining all entries is not allowed, even if the selected entry bears all the correct answers. Also, in the event multiple correct entries are received and there is a tie, a ballot cannot be selected at random to break the tie.
(c) Guessing and prediction contests
Competitions requiring participants to predict the results of a future event, estimate the number of objects in a container or guess the weight of an item without sufficient objective information are also regarded as chance-based promotions and should be avoided.
(d) Scratch-and-win cards
Promotions involving scratch cards are generally not permitted where only some lucky participants win a prize, or where all participants receive a prize but the prizes vary substantially in value.
(e) Spot-and-win contests
Promotions that involve participants displaying a sticker or other identifying marker on their vehicle, with prizes awarded to those randomly spotted by the organiser, are generally prohibited. This is as the winner is determined entirely on chance rather than any skill or predetermined criterion.
Promotions That Are Generally Permissible
The Guidelines also provide examples of promotional mechanics that are generally acceptable:-
(a) Skill-based competitions
Competitions that reward genuine skill, creativity or knowledge are generally low risk. For example, participants may be required to answer a few questions correctly and submit a slogan. All entries should be examined and where multiple entries bear the correct answers, winners should be decided based on the best slogan. Similarly, photography contests, slogan-writing competitions and judging panels assessing creative submissions are generally acceptable provided the judging criteria are clearly defined at the outset and consistently applied.
(b) Mark-the-object contests
Mark-the-ball competitions in which participants mark the original position of a removed object in the photograph are permissible where winners are decided based on whose mark is closest to the actual position. Any ties should be resolved through a separate skill-based competition or by sharing the prize.
(c) Instant win promotions
Contrary to popular belief, not all scratch-and-win promotions are unlawful. Instant win promotions may be permissible where every qualifying participant is guaranteed to receive a prize, the prizes awarded are of the same or similar value, and the element of chance determines only which prize is received rather than whether a participant wins at all. For example, a scratch card that first requires participants to answer a knowledge question correctly before revealing one of several prizes of approximately equal value would generally be permissible.
(d) Spot-and-win contests
A spot-and-win contest may be permissible if winners are determined based on predetermined criterion. For example, participants display a sticker on their vehicles and attend a predetermined location at a predetermined time, and the first specified number of vehicles spotted by the judges win prizes (e.g. the first 10 vehicles). Since a fixed place and time are set, participants have an equal opportunity to present themselves for spotting, thereby reducing the element of chance.
Conclusion
Promotional campaigns remain an effective marketing tool, but they must be structured carefully to avoid crossing the line into unlawful gaming or lottery activities. To minimise risk, businesses should prioritise skill-based promotions that reward participants based on knowledge, creativity or merit. Where a promotional mechanic incorporates an element of chance, it should determine only the allocation of prizes of the same or similar value among participants who are all guaranteed to receive a prize, rather than determining who wins. With careful planning and legal review, businesses can design engaging promotional campaigns that achieve their commercial objectives while remaining compliant with the law.
Joanne is a Partner at Wong Jin Nee & Teo. Her practice predominantly focuses on trademark prosecution and opposition proceedings, media and advertising clearance, and other regulatory compliance matters.