Consumer competitions: legal framework, risks, and practical advice for e-shops

Are you an e-shop owner considering organizing a contest for your customers? Consumer contests are popular marketing tools that can significantly contribute to increasing brand awareness, promoting sales, and expanding your customer base. Attractive prizes (such as electronics, vouchers, cars, trips, etc.) are sure to attract attention. However, it is necessary to know the legal rules, otherwise a good idea can turn into an expensive problem. In extreme cases, you may face charges of operating an illegal gambling game or a fine from the Czech Trade Inspection Authority in the millions of crowns. In this article, we will therefore clearly explain the legal framework for consumer competitions in the Czech Republic – from distinguishing between legal competitions and prohibited lotteries, through obligations under the Consumer Protection Act and the GDPR, to practical tips on how to avoid the most common mistakes. The aim is to motivate you to set up your competition responsibly and, if necessary, seek legal advice so that your promotion fulfills its purpose while remaining completely legal and fair.

Author of the article: Mgr. Ondřej Cicvárek, ARROWS (office@arws.cz, +420 245 007 740)

Legal framework for consumer competitions in the Czech Republic

Just a few years ago, Czech law significantly restricted marketing competitions – individual prizes were limited to CZK 20,000 (or CZK 200,000 per year). These restrictions were part of the old lottery law and effectively made it impossible to offer customers truly attractive prizes (winning a car in a supermarket competition was practically unthinkable at the time).

However, a fundamental change has taken place since 2017. The new Act No. 186/2016 Coll., on gambling, removed consumer competitions from its regulation. As a result, consumer competitions are no longer considered gambling, but a normal business practice. In practice, restrictions on prize limits and the obligation to report competitions to the tax authorities have been removed. Today, you can legally organize competitions with prize draws for valuable prizes (monetary and non-monetary, such as a car or an exotic vacation) without having to report anything in advance.

However, it is important to bear in mind that the competition must not be a hidden game of chance. The relaxation of the rules does not mean that anything goes – the key condition that the competition must not meet the definition of a game of chance under the Gambling Act still applies. If the contest were in fact gambling, it would be subject to strict regulation and penalties. Legal consumer contests differ from lotteries in that they must never simultaneously involve the possibility of winning, chance, and a compulsory payment (i.e., a bet).

Any payment that a contestant must make in addition to the cost of participation is considered a prohibited bet. The good news for retailers is that the normal purchase of goods or services at the usual price is not considered a bet. This is what distinguishes consumer competitions from traditional lotteries—the customer simply buys a product at the normal price and thereby gains a chance to win, which is not considered a gambling stake. However, it is essential to adhere to the "usual price." If a business artificially increases the price of a product (e.g., to ten times its normal value) just for the sake of a contest, then that purchase could be considered a stake in a game (a bet). Similarly, the law states that a fee exceeding the normal price of a phone call or text message required to enter a contest is considered a bet.

Unfair practices and the risk of fines

From a legal perspective, every consumer competition is a commercial practice towards consumers and is subject to Act No. 634/1992 Coll. on consumer protection. This Act prohibits unfair and misleading commercial practices. In short, the conduct of a business toward its customers must be honest, in accordance with the requirements of professional care, and must not mislead consumers. In the context of competitions, this means, in particular, complying with the rules of fair play and providing truthful information about the course of the competition.

In connection with unfair commercial practices, the law and supervisory authorities focus, for example, on the following offences that competition organisers should not commit:

• False or incomplete information in the rules or promotion of the competition. Example: A company promises a luxury prize in an advertisement, but in the detailed terms and conditions it includes a number of restrictive conditions in small print, or the actual value of the prize does not correspond to the promise.
• Failure to pay or deliver promised prizes to winners. For example, an e-shop draws the winner of a smartphone but does not send the prize to the winner, either for financial reasons or under the pretext that the winner did not register in time. Such conduct is clearly misleading.
• Influencing the outcome of a competition by fraud on the part of the organizer. For example, manipulating a draw so that a pre-selected acquaintance of the organizer "randomly" wins is prohibited.
• Creating a false impression of a prize to induce the consumer to make a purchase or take other action, without the prize actually existing. An example is sending emails such as "Congratulations, you have won a voucher – collect it after purchasing XYZ goods." In reality, no real prize awaits and the consumer is only being enticed to spend money.

If the competition becomes an unfair practice, the Czech Trade Inspection Authority (ČOI) may intervene. The ČOI monitors competitions and has the power to impose a fine of up to CZK 5,000,000 on the organizer for violating the prohibition of misleading or aggressive practices. In addition to fines, there is, of course, the risk of damage to the company's reputation and possible civil disputes with dissatisfied participants.

Competition rules: what not to forget

The stumbling block is often insufficiently prepared "rules of the game" for the competition. The rules should be clear, concise, and detailed to provide complete information to all participants. What should the rules contain? At a minimum, the following:

• Who can participate: Define the group of participants – e.g., "the contest is open to customers over the age of 18 with a delivery address in the US." Also consider excluding people close to the organizer. It is a good idea to exclude company employees and their family members so that the contest is perceived as fair and there are no conflicts of interest.
• How and when to participate: Describe the method of participation (e.g., by purchasing a product, registering on the website, sending a competition answer, etc.), the duration of the competition (from when to when) and, if applicable, the frequency of the draw or evaluation.
• Mechanism for determining the winner: Specify clear criteria for winning – will the winner be drawn at random or will skills be decisive (best answer, fastest task solver)? Describe the process of selecting the winner so that it does not raise any doubts. If you are drawing lots, specify when and how (e.g., electronically using a random number generator). Never draw lots "behind closed doors" – mistrust in the transparency of the draw can damage your reputation.
• Prizes and their delivery: Specify what is being played for – the type and value of the prizes. State how many winners there will be and how they will receive their prize. Smaller prizes can be sent by mail or courier; for more valuable prizes, personal delivery is customary (often combined with a marketing presentation, but always only with the winner's consent in case of, for example, photography). Don't forget the tax aspects – prizes may be subject to taxation.
• Restrictions and exclusion of participants: Specify the circumstances under which you may disqualify a contestant. Typically, this involves a violation of the rules (e.g., one person votes multiple times in violation of the terms and conditions, provides false information, manipulates the system, etc.) or failure to meet the conditions of participation.
• Additional conditions: Include provisions on the possibility of modifying or canceling the contest (in case of serious circumstances), specify who is the organizer and promoter of the contest, and where participants can submit any complaints or questions. Simply drafting high-quality terms and conditions is not enough – you must also publish them properly. The contest rules should be easily accessible to all participants throughout the contest, typically on your website or pinned to your social media profile if the contest is taking place there. Make sure that every contestant has the opportunity to read them in advance. Any change to the rules during the contest is risky – if necessary, you must transparently notify all participants (e.g., by email and by posting an update on the website).

Protection of contestants' personal data (GDPR)

When organizing a contest, you usually collect various personal data from participants – typically their name, contact details (email, phone number, address) and possibly other information (answers to contest questions, photo submissions, etc.). Any processing of this personal data is subject to GDPR rules. As the organizer, you are the data controller and are responsible for ensuring that the data is processed in a lawful and secure manner.

There are several legal bases for processing data – the consent of the contestant is often used. It is recommended to obtain the explicit consent of participants to the processing of their personal data for the purposes of the contest (e.g., by ticking a box on the registration form). Consent must be voluntary and informed – contestants should know what data they are providing and how it will be used.

Before a person participates in a contest, you must inform them about data processing, typically in the form of brief information in the rules plus a link to a more detailed Privacy Policy. In particular, specify what data you will process, for what purpose, for how long, and who will have access to the data.

Thoroughly secure the personal data you receive against misuse – use strong passwords, encryption, restrict access to necessary persons only, etc. Do not ask contestants for more data than you really need (e.g., contact details are usually sufficient for delivering prizes; birth numbers would be superfluous). If you have promised to use the data only for the contest, do not forget to delete it after the event (except, of course, for the winners' data, which you must archive for inspection purposes).

Expert advice pays off

Consumer contests are an effective and legal way to promote sales, but only if all the rules are followed. As you can see, the legislation surrounding contests covers a lot of areas, from gambling regulations and consumer protection to GDPR and tax obligations. The key to success is careful preparation: well-defined rules, a fair process, and transparent communication. If you are unsure whether you have forgotten anything, we recommend seeking legal advice. An experienced lawyer will help you review or draft customized contest rules to ensure they comply with all regulations and protect your interests. The investment in consultation is minimal compared to the potential fines or damage to your reputation. By complying with the legal framework, you can enter competitions without any worries and take full advantage of their marketing potential – to the delight of your customers and with peace of mind for your business.