Companies from various industries attract customers with contests, sweepstakes, and prize drawings. Since January 2019, such contests have been regulated by the Federal Act on Games of Chance (BGS) of September 29, 2017. The new legislation distinguishes between casino games, large-scale games, and small-scale games, and replaced the previously applicable Federal Act on Lotteries and Commercial Betting and the Casino Act. The new legal framework brought about numerous fundamental changes. For example, sales promotion contests are now permitted. Under the old law, participation in a prize draw could not be tied to a purchase. In practice, this meant that free participation had to be offered in order to avoid falling under the Lottery Act. This is no longer the case under the new regulations.
Essentially, the key is to understand when the scope of the BGS applies. The BGS applies only to games of chance. It defines these as follows: “Games in which a monetary prize or other monetary benefit is offered in exchange for a monetary stake or upon the conclusion of a legal transaction (Art. 3, para. 1, subpar. a BGS).” The BGS further subdivides the concept of games of chance into lotteries, games of skill, and sports betting. Depending on how they are conducted, a distinction is also made between large-scale and small-scale games, as well as casino games. Events, on the other hand, that are conducted exclusively free of charge are not covered by the BGS from the outset.
Excluded from the scope of the BGS are “lotteries and games of skill conducted on a short-term basis for promotional purposes, which pose no risk of excessive gambling and in which participation is contingent solely on the purchase of goods or services offered at prices that do not exceed market rates (see Art. 1(2)(d) BGS).” Participation in such a contest is therefore tied to a monetary stake or the conclusion of a legal transaction (e.g., a purchase). Consequently—subject to certain conditions (see below)—free participation is no longer required to conduct a contest that does not fall under the BGS.
Such sales promotion games can take various forms, as shown below.
According to Art. 3(b) of the BGS, lotteries are defined as games of chance that are open to an unlimited or at least a large number of people and in which the outcome is determined by a single random drawing or a similar procedure. Therefore, the BGS generally applies when, for example, beverages with prize codes in the lids or cornflakes with scratch-off tickets in the packaging are sold. Such games of chance, as defined above, are open to an unlimited number of participants, and the determination of the winner is based on chance; therefore, these promotions are considered lotteries.
Under the provisions of the BGS, games of skill are also covered (Art. 3(d) BGS). Games of skill are defined as games of chance in which winning depends entirely or predominantly on the player’s skill. In principle, sales promotion games also fall within the scope of the BGS if the awarding of prizes is not based on chance (as in a lottery) but is determined solely by the participant’s skill. A possible example of this would be a contest in which the participant must hit the correct target or identify a song.
As explained, promotional games in the form of lotteries and games of skill are, in principle, also subject to the BGS. However, if the following conditions are met, the exception provided for in Art. 1, para. 2, subpar. d of the BGS applies, and the competition is not regulated by the BGS.
Consequently, all of the above conditions must be met for the exception under Art. 1, para. 2, subparagraph d of the BSG to apply. The determination must be made separately for each criterion.
When conducting games of chance, the requirements set forth in the Unfair Competition Act (UWG) and the Data Protection Act (DSG) must also be taken into account.
The UWG aims to ensure fair and undistorted competition in the interest of all parties involved. Consequently, competition must not be misleading or unfair. This applies, for example, to unclear statements regarding whether a purchase is necessary to enter a contest; to cases where advertised prizes are not listed in order of value; to situations where prizes are promised that cannot be awarded; or to advertising that relies solely on catchphrases promising winnings without providing a complete picture of the contest.
When participating in a sweepstakes, consumers often provide their personal information. This falls within the scope of the DSG, which aims to protect the privacy of the individuals concerned. An organizer must provide transparent information about how it handles the personal data it collects and the specific purposes for which it intends to use it. References to a corresponding privacy policy are therefore required.
As it turns out, organizing a contest can involve various legal hurdles, as several statutory provisions must be taken into account. It is crucial that individual organizers have a clear understanding of the format in which they wish to conduct their contest. A key factor in this regard is whether the strict Money Gaming Act applies to their contest. From a marketing perspective, the exemption for sales-promotion contests is of particular interest, as such contests are excluded from the scope of the Money Gaming Act under certain conditions. To ensure that contests are conducted in a legally compliant manner and that exemptions can be successfully utilized, professional legal advice should be sought.
Short Checklist for Organizing Competitions:
Regardless of whether the BGS applies, the requirements of the UWG and the DSG must always be taken into account when conducting a contest.
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