Why are misleading sweepstakes mailings not illegal?

Contests, raffles and competitions

 

Sweepstakes, competitions, raffles, lotteries, etc. are popular advertising media. They address the willingness to take risks and the enthusiasm of customers to play and are intended to promote sales. In order to protect the consumer from excessive influence, the Act against Unfair Competition (UWG) sets certain requirements for the admissibility of such competitions.

Because competitions can be designed very differently in practice, these rules must be applied separately for each individual case and often give rise to legal disputes. Nevertheless, some basic rules can be drawn up, which are explained below:

No charge!

Participation in a competition must not be made dependent on the payment of a stake. Paid competitions must be approved by the authorities. Such a permit is linked to strict requirements.

A stake is understood to be a cash performance that is made in the hope of gaining a higher-quality performance. The typical case of such a bet is the purchase of a ticket. However, there is no use if, for example, shopping in a supermarket enables participation in a raffle organized by the supermarket at the same time. Indeed, the right to participate in the game is acquired with the purchase, but the costs of the purchase would have been incurred directly for the purchased items anyway. In this way, the consumer has received an equivalent value that is objectively worth the price paid.

If, on the other hand, the entrepreneur feeds the costs of the competition into the sales price of his goods or allocates the costs to the consumer differently, he organizes a covert, fee-based (and approval!) Competition.

In the case of an open or covert fee-based competition without official approval, the organizer is liable to prosecution according to Section 284 of the Criminal Code (StGB).

Coupling with sales of goods is not always permitted!

The general ban on linking competition and sales of goods no longer exists. A competition linked to a purchase is only available in Exceptional case inadmissible, namely if the coupling does not correspond to entrepreneurial diligence and is capable of significantly influencing the consumer's economic behavior.

A violation of these due diligence requirements exists if the attractiveness of the competition affects the customer so much that he makes a decision that he would not have made otherwise. This depends on the profit incentive, the amount of the win and the probability of winning. If the ability of the customer to make an “informed” decision is excluded, there is inadmissible influence.

Example:

As part of the European Football Championship, a furniture store promises to reimburse the entire purchase price of fitted kitchens acquired within a certain period if the German team wins. This is a very high monetary incentive for which there are quite high chances of winning. The likelihood that a consumer will decide to buy a kitchen as a result of this action is high. Such advertising would therefore be inadmissible.

Counterexample:

On the occasion of its 10th anniversary, a supermarket is holding a campaign in which it reimburses the purchase price to every 1000th buyer. This action is allowed. For one thing, the 1 in 1000 chance of winning is slim. A sensible customer will not decide to buy alone because there is a 0.1 percent chance of getting their purchase price back. On the other hand, the value of the purchase, which is at issue here, is regularly in the lower range (profit amount below 100 euros).

No misleading or non-transparent information!

The organizer of a competition or competition must clearly and unambiguously state the conditions of participation for the campaign, §§ 5, 5a UWG. The participant in such an action must know what he is getting into and what he can expect. This includes that the conditions of participation are easily accessible to him. This applies to both electronic and non-electronic business transactions.

Example:

A mail order company organizes a competition on the Internet. The conditions of participation can be clicked on and downloaded from the competition page. The requirements of §§ 5, 5a UWG are met, the Internet user can take note of the text without further intermediate steps.

Counterexample:

A shoe store has advertised a competition. A customer would like to see the conditions of participation and is asked to leave their name and address. Here, the knowledge of the conditions is linked to further requirements that may prevent the customer from sticking to his request. The conditions are no longer easily accessible to him.

In addition, the content of the conditions of participation must be clear. This includes, among other things, that the participation period of the competition is specified and the way in which the winner is determined.

The information about the competition must not mislead the consumer. The organizer is not legally obliged to indicate the amount of the chance of winning or the number of suspended prizes or the intended prize tickets. However, if he provides information on this, it must be correct and clearly formulated.

Example:

A travel agency is holding a competition which, according to the advertising text, can be used to win luxury trips. In fact, the prizes mainly include goods vouchers worth 5 euros. The main prizes, the luxury trips, only include the overnight stay. The winner has to pay for the journey himself. The information about this competition is misleading for the consumer. On the one hand, he is deceived about the value of the prizes (not just luxury travel), on the other hand, there are other hidden costs associated with the main prizes.

No psychological need to buy!

Since the customer should be as free as possible in his decision as to whether he wants to buy goods or not, his impartiality and freedom of decision must not be noticeably impaired. He must therefore not be influenced in such a way that he feels morally obliged to buy or that he gets into any other psychological predicament. The assessment of when there is such a psychological obligation to buy must always be made on a case-by-case basis. It can be problematic under competition law if the customer has to visit the organizer's business premises and is influenced here.

Example:

A large supermarket is holding a competition for which a cardboard display with participation cards and a box for inserting the completed cards was placed in the entrance area of ​​the supermarket. This is permissible. The customer can anonymously fill out and send off a participation card without further observation.

Counterexample:

The customer has won a hair care product in a competition held by a hairdresser and is supposed to pick it up from the store. Upon collection, the customer is given to understand that an appointment for a haircut is expected when the prize is handed over. In this case, the customer, who may feel compelled to make an appointment out of a moral sense of duty, is inadmissibly influenced.

No progressive customer recruitment!

Progressive customer acquisition refers to the so-called snowball or pyramid systems, which are based on the principle of recruiting more and more new participants. These game systems are immoral, as the last participating customers no longer have a chance of winning. Furthermore, the clarity is not guaranteed, so that the participants are not informed about the current status of the game.

Individual problems

  • Internet competitions or competitions on the net
  • The previous statements apply. However, they are supplemented by the information obligations according to §§ 5 ff. Of the Telemedia Act, i.e. the organizer must provide the branch address, his name, a contact address and - if available - his commercial register number.

    If the organizer of an internet competition is based in another EU country and is also targeting users in Germany with his game, the market location principle applies with regard to competition law. The law of the state on whose market the entrepreneur appears in advertising applies.
  • Sweepstakes in print media

    In particular, the prohibition of editorial advertising must be observed here!
  • Sweepstakes in drug advertising

    Prize contests or competitions are prohibited in drug advertising for consumers if they can promote drug consumption, Section 11 No. 13 of the Medicines Advertising Act (example: a pharmacy organizes a competition in which headache pills can be won).
  • Sweepstakes aimed at particularly vulnerable people

    Caution is advised if the competition is intended to appeal to a particularly vulnerable group of people, such as children or young people. These are easier to influence, so the aforementioned rules must be tightened.

Data protection and advertising

Competitions are often organized with the aim of gaining data. Here it should always be carefully checked whether the obligations arising from data protection and competition law have been met.

If the data is collected exclusively for the purpose of the competition and not used for any other purpose, this is generally permissible, Section 28 (1) No. 1 BDSG. It is important here that only the data that is actually required for the competition are requested.

However, special regulations apply to online competitions. Here, the participant must always be informed about the type, scope and purpose of the collection and use of his data, cf. § 13 Paragraph 1 TMG.

If, on the other hand, the data is to be used for advertising purposes, the participants in the competition must separately consent to this use (so-called double opt-in procedure). The requirements for effective consent are high and can vary in terms of the targeted type of advertising.

The participants must be able to see in which way (letter, e-mail, telephone, fax, etc.) and for which products and services are to be advertised and which companies are advertising. If the consent is given together with other declarations, the declaration of consent under data protection law must be particularly emphasized in terms of printing.

In the case of advertising by post, it may be possible under certain circumstances that a reference to the use for advertising purposes with reference to the possibility of revocation is permitted (so-called opt-out procedure).

The link between participation in the competition and consent to advertising must always be viewed critically, so that it is not possible to participate in the competition without consent to advertising. Whether such a coupling is permissible has not yet been conclusively legally clarified; in some cases, this was denied by the court.

Consequences of inadmissible competitions / competitions

The consequence of an inadmissible competition / raffle is usually a warning from competitors or competition associations, combined with the request to submit a declaration of cease and desist with criminal penalties. It follows that the competition / competition must end. Any materials that still exist, such as participation certificates or advertising material, must be destroyed. Since there is usually no time limit to end the promotion, this also means that the promised prizes may no longer be spent. This consequence is particularly painful for the companies concerned because of the associated loss of image.