If you don't fancy being bombarded by emails, letters or phone calls badgering you with various offers and you want to protect your privacy, think twice about entering competitions. While promotions and competitions can entice consumers with the lure of fabulous prizes, they aren't charities handing out something for nothing, as CHOICE has discovered.

Companies are looking for a quid for their quo. "There are a few reasons companies run promotions. It might be to increase sales, introduce a new product to consumers, or to get a potential marketing list," says Connor James, director of Permitz Group, a company that helps businesses set up and run competitions. "They hope that by giving away something related to what they do, they'll get a list of people who are interested in what they offer."

Privacy issues

In submitting an entry to a recent competition held by online travel booking site Expedia, prize-winners consented to the use of their name, photo, place of residence and any recording of them to be used for promotional and marketing purposes "in any media for an unlimited period without remuneration". Other competitions contain similar clauses. Expedia's prize-winner also agreed to participate in "reasonable promotional activities as requested by the promoter". So you might have to do an honest day's work (or more, as "reasonable" is not defined) for that cash!

Those who don't want to be battered with marketing material (or worse) should take care to ensure the competitions they enter aren't disclosing personal information to third parties. The same Expedia competition stated: "The promoter and third parties to whom the promoter provides this information may, for an indefinite period unless otherwise advised, use the information for … direct marketing, research and debt-collection purposes."

And some competitions disqualify entries that are incomplete or incorrect. If you're planning on omitting some personal information, or using a fake address or other details, you may be ineligible to claim your prize should you be lucky enough to win it.

Copyright concerns

If you're submitting a creative entry (such as a photo) to a competition, bear in mind possible copyright implications. Some terms and conditions sign over all your moral rights and copyright for your entry to the company running the competition, to use them however they see fit.

For a chance at an iPad mini, for example, entrants to a recent Plastic Surgery Hub competition agreed that "all entries become the property of the promoter", who is "entitled to use any of the entries submitted in any manner and for any purpose at its absolute discretion, including using the entries for future promoter's or their agent's book publications, promotional, marketing and publicity purposes without any further reference or payment or other compensation to the entrant."

Tricky prizes

While overseas trips can be one of the most popular prizes offered by promoters, deadlines for claiming your prize and blackout periods (such as around school or public holidays) may limit their usefulness.

Some prizes can be an ongoing financial drain. Are you able to pay for travel insurance if you win flights to an exotic holiday locale? Do you have a valid passport that will allow you to travel, or will you have to organise one at short notice or forfeit your prize? Once you get over the excitement of winning a new car, will you be able to afford the insurance, rego, servicing and weekly fuel bill?

And then there are those competitions with mystery prizes. When it comes to bizarre competition T&Cs, radio broadcaster Southern Cross Austereo took the cake with its Libra Get Fresh Wipes Ready for Anything Challenge competition. The prize? Participation in "an activity that may be thrilling, scary, adventurous, daring or risk-taking", which will "require the finalist to participate in a challenge which is yet to be determined". And for added suspense, "the promoter will surprise the winner/finalist on the day of the challenge for the winner/finalist to redeem the prize".

Top 7 tips for avoiding competition traps

  1. Read the full terms and conditions before entering a competition, and make sure you understand the entry requirements, such as whether there are limited entries per person.
  2. Check to see if you're signing up to receive marketing and promotions material, not just entering a competition.
  3. Know what the prizes are.
  4. Make sure there aren't nasty surprises that can make your prize more of a difficulty than a delight, such as blackout dates for holiday bookings or a limit to when the prize can be claimed.
  5. Look for a permit number, which indicates a chance-based competition is approved under a trade promotion permit in the states where permits are required.
  6. Make sure you know how your entry will be used if you enter.
  7. Opt out of marketing material if you can.

Competition law

Chance or skill?

There are two types of competitions out there: games of chance and games of skill. Chance games involve an element of chance in determining the winners, such as through a draw or an instant win. In some states they require permits to run and are regulated by various state gaming regulators, as well as under Australian Consumer Law (ACL).

A competition based on skill – such as a 25-words-or-less response to a question – doesn't involve an element of chance in determining the winners. It must be judged on the skill such as that shown in the originality of the answer; these kinds of competitions don't require permits, and are regulated by the ACL.

But these distinctions aren't always clear-cut. "We've seen competitions that claim to be skill-based but are in fact chance-based, such as where more than one person can get the right answer by guessing," says James.

Legal eagles

There are certain rules about how competitions must be run, particularly chance-based ones. While legislation varies from state to state, generally condensed T&Cs – setting out the key details that someone who wants to enter would need to know, as well as any onerous conditions – must be advertised with the competition, while more detailed T&Cs should be available for entrants by request. Permits may be required in some states depending on the prize pool.

You should direct any complaints about chance-based competitions to the departments/offices listed below. And both skill- and chance-based competitions are subject to the ACL, as administered by your local department of fair trading or consumer affairs and the ACCC.

Who to complain to about dodgy competitions

ACT: ACT Gambling and Racing Commission

NSW: Office of Liquor, Gaming and Racing

NT: Department of Business

Qld: Office of Liquor and Gaming Regulation

SA: Office of the Liquor and Gambling Commissioner

Tas: Department of Treasury and Finance

Vic: Victorian Commission for Gambling and Liquor Regulation

WA: Department of Racing, Gaming and Liquor

Competition horror stories

"Winners" aren't always grinners

In 2011, Tanya Delaney entered a competition for a chance to win $250,000 at the Dee Why Grand shopping centre in Sydney's Northern Beaches. When her name was called out, it must have seemed like a dream come true. But the dream soon crumbled when Tanya was informed she hadn't actually won the cash, but instead had to pick one of 250 envelopes, only one of which held the big bucks. Tanya reportedly went home with a TV and $1000 – nice, but a far cry from the $250,000 she had hoped for.

Jess takes issue with some of the restrictive terms of photography competitions: "I really object to photography competitions where they say in the fine print that if you win you're giving us your photo and all rights to it in perpetuity to use as we please."

Satrina came across a prize that kept on taking: "I won a free sitting for a family portrait, but when I checked the [T&Cs] before the sitting I discovered I had to spend a minimum of $200 on a photo pack. I didn't bother with the sitting."

And Charlotte got stung by a potential premium SMS scam when entering a competition advertised via Facebook. After seeing an ad asking her to text a phone number in order to go into the draw to win a $500 voucher in exchange for answering some questions, she sent what she thought was a one-off SMS. After being pestered with several other text messages, which continued even after she stopped responding to them, Charlotte received a huge phone bill. "I'll never respond to anything in that manner again – no matter how legitimate it looks!"

What the promoters say

CHOICE spoke with a number of industry insiders who have run competitions for a variety of sources. It turns out not all competitions are as straightforward – or random – as they appear to be.

Belinda*, whose job is working in the promotions department of a NSW-based arts organisation, saw her run dozens of competitions. "There was one where people were meant to put their entries into a barrel. The problem was, the barrel was way too small. We had to keep emptying it to make room for more entries, so by the time the draw was done we had 10 garbage bags full of entries out the back. In the end, only the people in the final barrel could have won the prize, which was terrible."

Lauren* worked at a small magazine publishing house and was responsible for running monthly prize draws. The prizes were sourced from homewares companies, publishers, and other companies for free. One month, a publishing house sent a fat cookbook. "It was a tome! It would have cost a fortune to ship out," she says. "So my boss just decided to keep it, rather than pay for the shipping to get it to someone. And then there was the time we got tickets to a show in town. The publisher quite fancied [the idea], so she went instead of giving them out to our readers."

*Not their real names