The magic weapon of influencers - or how to organise an online prize draw?

2021.09.03.

The magic weapon of influencers - or how to organise an online prize draw?

In online social media, we`ve all come across sweepstakes or promotions that might make you think that raffling off a gift or launching a new campaign among your followers is as easy as posting a post on your page. But the legal framework for prize draws is more nuanced than that.

Suzy Hazelwood

Given the proliferation of modern methods of game management, it is important to know which games of chance, prize draws and promotional games for marketing purposes are subject to mandatory legal requirements, with a particular focus on online gift draws.

I. GAMES OF CHANCE SUBJECT TO AUTHORISATION

In all cases, the first question asked by gambling organisers is the same: is the game to be organised subject to a licence?

The concept of licensable gambling is defined in the Gambling Act, which provides that the following conjunctive conditions must be fulfilled in order to constitute gambling within the meaning of the law:

(a) the player pays a stake or a fee,

(b) he or she becomes entitled to a cash prize or other prize of pecuniary value,

c) where the chances of winning or losing depend exclusively or predominantly on chance.

Where the foregoing criteria are met, the game organised by the organiser is subject to the law and hence to the obligation to obtain a licence, irrespective of whether or not the law specifically designates the game as a sub-genre of gambling.

The provisions of the Act also apply to games which meet the above conditions where they are conducted by means of a communication medium, such as television or the Internet. This includes casino games, online casino games, card games, slot machines, betting and remote gambling.

Games requiring a licence can only be played with the permission of the authority responsible for supervising gambling.

II. PRIZE DRAW GAMES WITH GIFT DRAWS

In addition to the games falling into the above categories, gift draw lotteries are more frequently encountered on online social platforms and, although they can be freely organised and operated, the fact of their organisation must be notified to the supervisory authority.

The law defines prize draws for advertising and marketing purposes as games where the manufacturer makes a lottery ticket available to the customer free of charge, i.e. without any further consideration, linked to the sale of a good or product and undertakes to provide the winner with a prize in the form of goods or services if the lottery tickets are drawn publicly. A further criterion is that the lottery ticket must always be made available to the purchaser in physical form, so that participation by SMS or telephone registration is not acceptable.

During the draw, the organiser or operator must ensure maximum publicity, which can be achieved by conducting the draw in the presence of a notary and by giving prior notice of the place and time of the draw. The presence of a notary is also required in the event that the drawing of the winning player is carried out by means of random software.

III. NOTIFICATION PROCEDURE

The organiser must notify the Authority of the organisation of the prize draw within 10 days prior to the announcement of the draw, using the form provided by the Authority. The organiser is also obliged to pay the supervision fee calculated on the basis of the prize draws to be held within 10 days prior to the draw and to draw up a final account of the conduct of the prize draw within 150 days of the draw event.

IV. TAX ISSUES

The prize draws also give rise to a tax liability, as the organiser, as the payer, is required to pay personal income tax on the prizes of the prize draws, if won by an individual, and, in the case of prizes not received, to declare the value of the prizes concerned as a gaming tax and pay it to the central budget.

V. "LIKE, SHARE AND WIN!" - or promotional games as marketing tools to boost sales

The rules of the Act distinguish gift draws, which are essentially promotional in nature, from other so-called "promotional" games, which are similar but do not qualify as gift draws or games of chance. Promotional games are also subject to the obligation to draw up rules and publish them to the public. Participation in the game is free of charge. This includes games organised on Facebook or Instagram without a stake, based on likes, comments and shares, where, in addition to the obligations set out below, it is necessary to be aware of the obligations, rules and guidelines of the platform.

There is no prize draw, i.e. no notification is required and therefore no promotion, if the company does not offer the opportunity to participate to players in connection with the sale of other goods or products. In this case, the chances of winning or losing depend largely on the player's answers and their correctness.

Therefore, if you want to answer the above question, you must fully examine the conditions of participation and the detailed rules of the game.
According to the established practice for online prize draws, a promotion may be deemed to take place if:
a.) players do not receive a gift voucher (voucher, coupon, certificate) at the time of purchase or use of the service, which can be used to win a prize by publicly drawing it,
b.) by declaring a gift lottery ticket as a winner in accordance with pre-defined conditions ("Every 100 wins!"),
c.) coupons for immediate winnings (with "You win!" printed on the packaging), received free of charge at the time of purchase,
d.) a competition on a social networking site that is not linked to a purchase or service, the player only has to comment/share/like a piece of content,
e.) a promotion linked to the purchase of a product or the use of a service, where the player has to submit an entry based on a set of criteria (Take a picture of the product purchased) and the winners are not selected by lottery.

Legislation and literature used:
Act XXXIV of 1991 on the Organisation of Gambling
Government Decree No. 329/2015 (XI. 10.) on the detailed rules for the responsible organisation of games.
PM Decree No. 32/2005 (21.X.2005) on the implementation of tasks related to the licensing, organisation and control of certain games of chance


Author: dr. Zoltán Nyilasi

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The magic weapon of influencers - or how to organise an online prize draw?

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JTK&Partners | 2021.09.03.

In online social media, we`ve all come across sweepstakes or promotions that might make you think that raffling off a gift or launching a new campaign among your followers is as easy as posting a post on your page. But the legal framework for prize draws is more nuanced than that.

Details >
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