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

Legal Framework for Consumer Competitions in the Czech Republic

Since 2017, however, a fundamental change has occurred. The new Act No. 186/2016 Coll., on Gambling, removed consumer competitions from its scope of regulation. As a result, a consumer competition is no longer considered a game of chance, but a standard commercial practice. In practice, this has eliminated restrictions on prize value limits and the obligation to report competitions to the tax authorities. Today, you can legally run competitions with draws for valuable prizes (monetary and non-monetary, even a car or an exotic holiday) without any prior reporting requirements.

However, it is important to remember that a competition must not be a disguised game of chance. The relaxation of the rules does not mean that anything is permitted – the key condition still applies: the competition must not meet the definition of a game of chance under the Gambling Act. If a competition were in fact a game of chance, it would be subject to strict regulation and penalties. A legal consumer competition differs from a lottery in that it must never simultaneously contain the possibility of winning, chance, and a mandatory payment (a so-called stake). 

A prohibited stake is considered to be any payment that a contestant must make in addition to participate. The good news for businesses is that the regular purchase of goods or services at the usual price is not considered a stake. This is how a consumer competition differs from a classic lottery – the customer simply buys a product at its normal price and thereby gets a chance to win, which is not considered a gambling deposit. However, it is essential to adhere to this “usual price”.

If a business were to artificially inflate the price of the product being sold (e.g., to ten times its normal value) just for the competition, that purchase could be assessed as a stake in the game. Similarly, the law states that, for example, a fee exceeding the standard cost of a phone call or SMS message required to enter the competition is considered a stake. 

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 deceptive commercial practices. In short, a business's conduct towards customers must be fair, in line with the requirements of professional diligence, and must not mislead consumers. In the context of competitions, this primarily means adhering to the rules of fair play and providing truthful information about its process.

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

• False or incomplete information in the competition rules or promotion. For example: A company promises a luxury prize in its advertising, but the detailed terms and conditions include a series of restrictive conditions in fine print, or the actual value of the prize does not match the promise.

• Failure to pay out or hand over promised prizes to winners. For example, an e-shop draws a winner for a smartphone but ultimately does not send them the prize – whether for financial reasons or under the pretext that the winner did not claim it in time. Such conduct is clearly deceptive.

• Fraudulently influencing the competition's outcome on the part of the organiser. For example, a rigged draw to ensure that a pre-selected acquaintance of the organiser 'randomly' wins is prohibited.

• Creating a false impression of winning to induce a consumer to make a purchase or take other action, without a prize actually existing. An example is sending emails like “Congratulations, you have won a voucher – claim it after purchasing product XYZ.” In reality, no real prize is waiting, and the consumer is merely being enticed to spend money.

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

Competition Rules: What Not to Forget

A common stumbling block is often inadequately prepared competition "game rules". The rules should be drafted clearly, concisely, and in detail to provide all participants with complete information. What should proper rules contain? At a minimum, these elements:

• Who can participate: Define the group of participants – e.g., “the competition is open to customers over 18 years of age with a delivery address in the Czech Republic.” Also consider excluding persons close to the organiser. It is advisable to exclude company employees and their family members to ensure the competition is perceived as fair and to avoid conflicts of interest.

• How and when to enter: Describe the method of entry (e.g., by purchasing a product, registering on the website, submitting a competition answer, etc.), the duration of the competition (from when to when), and, if applicable, the frequency of draws or evaluations.

• Mechanism for determining the winner: State clear criteria for winning – will the winner be drawn randomly, or will it be based on skill (best answer, fastest to complete a task)? Describe the winner selection process in a way that does not raise doubts. If you are conducting a draw, state when and how (e.g., electronically using a random number generator). Never conduct the draw 'behind closed doors' – distrust in the transparency of the draw can damage your reputation.

• Prizes and their delivery: Specify what is at stake – 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 post or courier; for more valuable prizes, a personal handover is common (often combined with a marketing presentation, but always only with the winner's consent for things like photography). Don't forget the tax aspects – prizes may be subject to taxation.

• Restrictions and disqualification of participants: State the circumstances under which you can disqualify a contestant. This typically involves a violation of the rules (e.g., a person voting multiple times against the terms, providing false information, manipulating the system, etc.) or failing to meet the participation conditions.

• Other conditions: Include provisions about the possibility of modifying or cancelling the competition (in case of serious circumstances), specify who the promoter and organiser of the competition are, and where participants can submit any complaints or questions. Simply drafting quality terms is not enough – you must also properly publish them. The competition rules should be easily accessible to all participants throughout its duration, typically on your website or pinned to your social media profile if the competition is running there. Make sure every contestant has the opportunity to familiarise themselves with them in advance. Any change to the rules during the competition is risky – if necessary, you must transparently announce it to all participants (e.g., by email and by posting an update on the website).

Protection of Contestants' Personal Data (GDPR)

When organising a competition, you generally collect various personal data from participants – typically their name, contact details (email, phone, address), and possibly other information (answers to competition questions, photographic submissions, etc.). Any processing of this personal data is subject to GDPR rules. As the organiser, you are in the role of a data controller and have an obligation to ensure that you process the data lawfully and securely.

There are several options for the legal basis on which to process data – the contestant's consent is often used. It is recommended to obtain explicit consent from participants for the processing of their personal data for the purposes of the competition (e.g., by ticking a box on the registration form). Consent must be voluntary and informed – the contestant should know what data they are providing and for what purpose it will be used. 

Even before a person enters the competition, you must inform them about the data processing – typically in the form of a brief notice in the rules, plus a link to a more detailed Privacy Policy. In particular, you should state what data you will be processing, 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, and restrict access to only necessary personnel. Do not require more data from contestants than you actually need (e.g., contact details are usually sufficient for prize delivery; a personal identification number would be excessive). If you have promised to use the data only for the competition, do not forget to delete it after the event ends (with the exception, of course, of winners' data, where you must archive the prize handover for potential inspection).

Professional Advice Pays Off

Today, consumer competitions are an effective and legal way to promote sales, but only if all rules are followed. As is evident, the legislation surrounding competitions covers multiple areas – from gambling regulations and consumer protection to GDPR and tax obligations. The key to success is careful preparation: properly configured rules, a fair process, and transparent communication.

If you are unsure whether you have covered everything, we recommend seeking legal advice. An experienced lawyer from our Prague-based team can help you review or draft bespoke competition rules to ensure they comply with all Czech legislation and also protect your interests. The investment in a consultation is minimal compared to a potential fine or damage to your reputation. By adhering to the legislative boundaries, you can launch competitions without worry and fully leverage their marketing potential – to the delight of your customers and for the peace of mind of your business.