Subscription-Based Trade Promotion Models: Is There a Lawful Way Forward?

Recently, I had the opportunity to chat with Jasper Wells from the ABC News regarding subscription-based trade promotion lotteries.

It was great to see my much-loved trade promotions “up in lights”, although perhaps not for the right reasons.

I also managed to get my five seconds of fame appearing on ABC National News that same evening discussing subscription model trade promotions more broadly.

The reality is that many of these models get a bad rap. In some cases, rightlyso. That said, I do think there is potentially space for subscription-style models to operate within the Australian regulatory framework.  But only if they are carefully designed around the key principles underpinning trade promotion law.

The Key Legal Distinction

As the name suggests, a trade promotion lottery is intended to promote an organisation’s bona fide goods or services.

This means a business can offer an entry into a promotion alongside the purchase of genuine goods or services but cannot simply sell entries into a promotion.

That distinction matters.

Commercial organisations are generally prohibited from selling tickets or entries into a lottery-style activity unless specifically authorised under another regulatory framework.

This is also where it is important to distinguish between:

• trade promotions (typically run by commercial businesses); and

• raffles (typically run by charities or not-for-profit organisations).

Charities and not-for-profit entities can generally sell raffle tickets or entries — but they must genuinely be operating as a charitable or not-for-profit organisation and comply with the strict regulatory rules governing charitable fundraising and raffles.

A commercial business cannot simply “dress up” a paid lottery as a trade promotion.

So Where Could a Subscription Model Potentially Work?

In my view, I do feel there is room for a subscription-based trade promotion model, but only where the following parameters are genuinely met:

1. The organisation is genuinely offering goods or services
   For example, the business may position itself as offering curated packages, memberships, rewards programs, discounts, experiences or bundled services.

2. The pricing reflects the value of those goods or services
   The subscription or membership fee cannot simply be a disguised payment for entries into a draw. The package itself needs to carry standalone value.

3. Different pricing tiers reflect different value offerings
   If there are multiple membership or subscription tiers, the increased pricing should correspond with increased goods or service value — not merely additional promotion entries.  In other words, the only difference between tiers cannot simply be “more tickets in the draw”.

4. Consumers would still plausibly purchase the offering without the promotion attached
   This is the critical commercial reality test. If the promotion disappeared tomorrow, would consumers still reasonably see value in the underlying offering?

That final point is often where these models become vulnerable.

A useful example of where this discussion becomes more nuanced is the LMCT+ model - arguably the most well-known subscription-based rewards platform operating in Australia.  LMCT+ was recently in the news with members being offered exclusive fuel discounts at a LMCT+ branded petrol station opened by Adrian Portelli in April.  This is, in my view, the type of bona fide and genuinely sought-after benefit that could potentially form part of a legitimate goods or services offering connected to a trade promotion. 

Consumers have long sought out discount programs, loyalty memberships and fuel saving initiatives (who doesn’t remember the shopper docket system and before that, some old-fashioned coupon clipping).  Where a membership delivers real-world commercial value beyond simply obtaining entries into a draw, the legal analysis starts to look very different. The key issue remains whether the subscription is genuinely being purchased for the underlying benefits and services offered, rather than effectively operating as a disguised mechanism for buying chances to win prizes. 

It is also important not to lose sight of the fact that there are many entirely legitimate businesses built around sourcing, negotiating and packaging discounts, offers and member benefits for consumers. Put simply, these organisations shouldn’t be prevented from running trade promotions. 

A classic example is The Entertainment Book. Originally launched in 1994 as a physical book filled with coupons and discount offers, the business has since evolved into a sophisticated digital platform and app-based membership service. At its core, however, the model has remained the same for more than 30 years: sourcing, negotiating and packaging value for consumers through relationships with participating businesses.

Importantly, there is genuine work, skill, infrastructure and commercial connection involved in building these ecosystems. Businesses operating these models spend significant time establishing partnerships, negotiating discounts, maintaining networks, marketing the platform and continually refreshing the value proposition for members. That activity itself has real commercial value.

That is why I think regulators and industry alike need to be careful not to automatically characterise every subscription-based rewards model as an attempt to circumvent lottery laws.  There needs to be space in the trade promotion world for businesses who are genuinely creating and selling a valuable membership offering, similar to long-standing models like The Entertainment Book. 

There is also an important broader commercial principle at play here: businesses should generally have autonomy to determine the pricing of their own goods and services, and that necessarily includes membership programs and subscription packages. The fact that a business places a particular value on curated discounts, exclusive offers, access benefits, rewards ecosystems or bundled memberships should not, by itself, invalidate the legitimacy of the model.

Different businesses place value on different forms of convenience, access, relationships, curation and consumer engagement. Provided the offering is genuine and the pricing is not merely a disguised payment for entries into a prize draw, there is a strong argument that regulators should be cautious about substituting their own view of what a membership package “should” cost for the commercial judgment of the business and ultimately the purchasing decision of consumers themselves.

The Regulatory Reality

Having said all this, even where a business carefully structures a model around these legitimate principles, there is no guarantee regulators will approve it.

Government departments, particularly in South Australia and New South Wales, are extremely focused on these arrangements right now. 

The underlying regulatory concern appears to be this: if a promoter is relying on revenue generated from “entries” to fund prizes (rather than genuinely promoting existing goods or services), there is a risk the promotion starts looking less like a trade promotion and more like an unauthorised lottery.

There is also a very practical consumer protection concern.

If the business model only works where entry revenue exceeds the value of the prizes on offer, what happens if that revenue never materialises?

I assume that the reasonable fear from a regulator’s perspective is that prizes may ultimately not be awarded as offered.  The rise in complaints about trade promotions generally may suggest that this is, in fact, happening in some instances.

Final Thoughts

Trade promotions remain an incredibly effective marketing tool when used properly. But the rise of subscription-based and membership-driven prize models is pushing against the edges of Australia’s regulatory framework.

There is a pathway for businesses to innovate in this space, but it requires careful structuring, a genuine underlying product or service offering, and a very clear understanding of where the legal line sits.