And the big “winner” is (drumroll) … the Italian Competition Authority. A multinational electronics company was a most recent victim of the stringent Italian prize promotion regulations — to the tune of € 3.1 million (or roughly US$3.37 million). The costly sanctions were imposed on the company by Italian authorities for, among other issues, unfair commercial practices. The authorities challenged the execution of some of the company’s promotions, claiming that the advertising for the promotions did not include clear and sufficiently visible explanations of how to win the prize, in violation of Italian customary commercial practices, and that the sponsor’s requirement that the winner must register and provide personal information in order to win the prize was in violation of Italian law as well. And the issues highlighted above are just some of the parameters a marketer needs to consider when running a successful sweepstakes in Italy, from a notary requirement to the need for a VAT (“value-added tax”) representative for non-Italian sponsors to the need for compliance with Italian privacy laws. The combination of these issues provided the perfect backdrop for an enforcer to make an example out of the multinational company’s marketing efforts, and gives us the perfect opportunity to remind companies to be diligent when running international promotions while we alert our base to these complex foreign issues.
When a client says, “I want to run a global sweepstakes,” it’s important to understand what that means from a compliance perspective. In counseling clients, a good promotions lawyer must try to understand who will be permitted to enter a promotion (as many regulators will take the position it is their job to protect residents of their country, no matter where they live) and where it will be available — which in the Internet age may be everywhere unless scope is explicitly limited. Sweepstakes requirements may vary significantly from country to country, from registration and bonding requirements, to notarization and translation requirements, to requirements about the size and nature of the prize, which presents a significant compliance challenge. Potential sweepstakes sponsors must also take into account trade and privacy issues, as a global promotion may require shipping of prizes and/or collection and sharing of personal information. Often, promotions counsel will seek the advice of (or refer the client to) local lawyers located in the jurisdictions where the promotion will be offered.
Because of the variation and complexity in sweepstakes and promotions laws, in addition to the practical challenges, even the most ambitious marketer may question whether it’s a good idea to run a truly “global” sweepstakes. Marketers will frequently choose to target key jurisdictions and understand the legal framework in those countries. Brazil, for example, has very specific authorization requirements and prize restrictions. Generally, a legal entity must request a formal authorization by the Brazilian National Savings Bank before it conducts any game of chance or skill. It is important to note that only goods manufactured in Brazil (or regularly imported goods), public debt titles, home apartments located in an urban zone, Brazilian tourism packages, and scholarships may be awarded as prizes.
Many companies in the U.S. think opening a sweepstakes to residents of Canada will be simple, but there are a few caveats. Traditional games of chance are actually prohibited in Canada, although the Canucks take a unique approach to addressing this issue and simply require the winners to demonstrate a skill, typically by requiring potential winners to answer a math question before awarding the prize. More complicated are promotions open to residents of Quebec, where rules and advertising must be translated in French and registered with the local regulator.
Foreign country sweepstakes laws may include other unique requirements. For instance, in the Dominican Republic, it is not possible to use the image of the contestants without consent, and the contest’s rules must specify where the images are likely to appear. Netherlands prohibits games of chance in which the single purpose of the promotion is to collect the personal data of participants, and the prize of a chance-based game cannot exceed € 100,000.
Laws on running a sweepstakes outside the U.S. are not always a headache. Take Germany, for example, where sweepstakes are allowed if participants do not pay to enter, and where there is no bonding, prize deposit or license required. Another example is Switzerland, which simply requires that, if the winning prize depends on luck, no sales may be combined with the promotional game.
As the world according to marketers shrinks and companies are enticed by the idea of running global sweepstakes, always keep in mind the intricacies and particularities of running the promotion in the applicable countries and, of course, consult with local counsel. And if the examples described above do not convince you to understand each country’s prize promotions rules and regulations, the potential for € 3.1 million in sanctions might.