Giveaways and Italian prize contest regulation: An open issue

Giveaways are an increasingly widespread customer engagement strategy, particularly on social networks. Indeed, social networks offer many different opportunities to engage followers and advertise brands at the same time. For instance, it is common practice for an influencer to advertise a particular company brand by offering a prize by randomly selecting (for example, by a draw) a winner from the pool of followers who like a post, share a piece of content, add a comment and a tag, or perform a similar effortless action indicated by the influencer. In other cases, influencers find different ways to thank their followers when their number reaches significant thresholds (hundreds of thousands of followers), for example by surprising the most active ones with gifts. Do such kinds of giveaway have any specific legal qualifications? Unfortunately, there is no single answer to this question, as the answer depends on both the specific features of the initiative and the mechanics involved.

Giveaways and prize contests 

One of the most common kinds of giveaway involving both enterprises and influencers is the type that works as follows: an enterprise, as promoter of the initiative, asks an influencer to advertise (and potentially perform) a random draw accessible to all followers who perform an effortless action, such as liking, sharing, commenting, or posting a piece of content; then the follower(s) selected by random draw win a prize (or prizes), typically in the form of one or more of the enterprise’s branded products.

This type of giveaway falls under the definition of a prize contest in Section 2 of Italian Presidential Decree of October 26, 2001, no. 430 (“Decree”). In a nutshell, this describes a promotional activity where the attribution of prizes basically depends on chance or the ability/skills of the entrants. More generally, the Decree applies to prize promotions consisting of public promises aimed at spreading knowledge of the promoter’s products and services within Italian territory and having, in any case, at least partially commercial purposes.

The Decree, along with the interpretative circulars and practices of the Ministry of Economic Development (“Ministry”), including the Frequently Asked Questions issued by the Ministry on March 30, 2017 and subsequently amended several times (“FAQs”), provide for a lot of fulfilments to be carried out in case of prize contests (for example, advance communication must be sent and a bond must be provided to the Ministry; a notary public or an official of the Chamber of Commerce must be involved in certain phases of some contests; and so on). Specific restrictions also apply with respect to such a promotion’s terms and conditions and related advertising materials. Furthermore, social network terms and conditions include specific guidelines on promotions that establish further limitations.

Accordingly, when carrying out this kind of giveaway on social networks, the promoter must comply with all such fulfilments, restrictions, and limitations. Moreover, some of these requirements have particular impact in the case of prize contests carried out online (like the giveaway discussed). See restrictions on social networks and those on the location of the relevant servers in the FAQ for examples.

In addition, since the Decree requires prize contests to be carried out only by enterprises (meaning entities enrolled in the Register of Enterprises), by way of interpretation it can be argued that influencers are not allowed to organize this kind of giveaway autonomously. Nevertheless, they can promote or materially execute the giveaway when it is carried out by an enterprise as promoter of the same.

When is a giveaway not a prize contest?

Generally speaking, a giveaway involving the mechanics described above is classified as a prize contest. Nevertheless, if specific circumstances occur, the Decree and the related fulfillments and restrictions do not apply (although, the provisions on consumer protection must always be fulfilled).

For example, the Decree establishes a specific exception if the prize has minimal value (meaning a few euro cents) and its attribution does not depend upon the nature or amount of product purchases; in this case the prize contest is not subject to the Decree. Consequently, if a giveaway offers prizes not in excess of that value (basic pens and pencils would be an example) the Decree does not apply to the giveaway.

Furthermore, absent the public promise of a prize by the promoter, the initiative is not considered a prize contest. For example, the enterprise or the influencer may privately select some users to whom prizes are awarded without first announcing that opportunity; this practice is quite common among influencers who decide to thank their followers when their number reaches significant thresholds.

Moreover, the so called “Freebies” are not prize contests. Such initiatives are not based on chance, since they imply that the influencer or the enterprise creates digital content of some kind (for example, a podcast, a tutorial, a video) that has value for their followers and sends the content to all of the followers who carry out the same effortless action mentioned above. Accordingly, since such initiatives are different from giveaways, they are not subject to the requirements of the Decree.

These examples show that the specific mechanics of each giveaway may have a very significant impact on the assessment of that giveaway. Indeed, even a slight change to the mechanics can lead to a different classification, though frequently the process is not so straightforward. For instance, what if followers are required to comment on a post and the enterprise or the influencer promises a prize for the author of the comment they like the most? In this case, is the winner selected on a random basis, or is it a matter of ability (which would render the giveaway a prize contest as well)? It may depend on the kinds of comments required. There is no answer in absolute terms and the mechanics of the initiative must always be examined closely.

The evolution of the concept of engagement initiatives

From a different perspective, it is interesting to note how some activities born on social networks as mere influencer engagement initiatives have since become advertising initiatives potentially linked to the giveaway concept or, more generally, falling under the definition of prize contest.

One example is what is known as a “book club” initiative. A while ago some influencers started the practice of sending a book they were reading to some followers, asking them to write comments on a book’s page, share the book with other selected followers, and then send the book back to the influencer. The initiative did not have any commercial or advertising purpose and, in fact, influencers did not publicly disclose any details about the books to their followers.

Nevertheless, such initiatives have evolved from mere “personal” initiatives on the part of influencers aimed at engaging their followers into activities organized in partnership with book publishers for advertising purposes. As a result, they can be considered giveaways and, as such, they are potentially subject to the Decree. Indeed, what happens today is that an influencer publishes a post and tags the book’s publisher and the latter then awards one or more copies of the book to some randomly-selected followers who perform an effortless action. In this case, the commercial purpose and the involvement of the publisher as a promoter of the initiative are quite clear.

Similarly, today many influencers organize giveaways by placing branded products (such as clothes, cosmetics, and the like provided by the enterprise) somewhere in their cities, and they then invite their followers to go to those locations. The first follower to reach the indicated location and find the products wins them. This kind of giveaway may be regarded as a prize contest depending on its features, since the Decree also classifies initiatives based on the ability of the winner who fulfills specific conditions first (known as “rush & win” initiatives) as prize contests; however, originally this kind of initiative did not have any advertising purposes (for example, the influencer did not disclose the product brand and only the winner became aware of it) and was aimed at merely increasing the number of followers.

Connecting the dots

It is clear that today both enterprises and influencers aim to maximize the effectiveness of their engagement strategies, and some initiatives that once did not even have a specific advertising purpose today are, in many cases, giveaways subject to the Decree. This shows the need for greater awareness on the part of all the parties involved.

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