International online prize promotions involving customers located in Italy are now subject to lower restrictions according to a recent interpretation of the Italian Ministry of the Economic Development.
The puzzle of the Italian regime on prize promotions
I have already discussed in the past about the complex regime in place in Italy for prize promotions (Read “Online prize promotions, sometimes a problem!“). This regime applies both to promotions based on chance or skills (the so-called “concorsi a premi“) and when they award prizes in kind upon purchase (the so-called “operazioni a premi“), while prize promotions awarding prizes in cash are banned.
The most relevant obligations to be accomplished in case of prize promotions based on skills or chance are the following:
- appoint a VAT representative in Italy if the organizer of the promotion is not an Italian company;
- draft the Ts&Cs of the prize promotions under the instructions provided by the regulations;
- post a performance or an insurance bond whose value needs to be equal to the overall value of the prizes offered;
- send to the Ministry of the Economic Development the Ts&Cs and the performance/ insurance bond at least 15 days before the beginning of the contest;
- require the presence of a public notary on the selection of the winners (i.e., in case of drawing of the prizes, he will need to be present at the drawing) and on the closure of the prize promotions (i.e., after the delivery of the prizes to the winners, he shall draft the minutes of the closure of the contest);
- send to the Ministry of the Economic Development the minutes of the closure of the prize promotions prepared by the public notary;
- perform the required tax payments; and
- carry out in Italy all the activities relating to the prize promotion which implied that participants are only people located in Italy and that in case of online prize promotions at least a mirror server had to be based in Italy.
Fines for breach of the above requirements have been recently lowered, but the risk is that an unlawful prize promotion is deemed to be misleading advertising leading to penalties that were recently issued in the range of € 3 million (Read “€ 3+ million sanction issued for unlawful prize promotions in Italy“).
An opening for international online prize promotions with participants located in Italy?
The above requirements represented a significant issue for foreign companies running international prize promotions with participants located in Italy since they had to run a contest dedicated to Italian customers. But, my interpretation of a few years ago (Read “Online prize promotions, restrictions waived?“) has now been partially validated by the FAQs issued by the Italian Ministry of the Economic Development.
According to the Ministry, if a foreign entity based in the European Union runs a prize promotion in Italy, it shall only comply with the laws of its country of establishment under the terms of the eCommerce Directive, while Italian authorities will have jurisdiction only on consumer protection matters. This interpretation has to be read in my view, only within the following limits:
- it applies only to foreign entities based in the European Union;
- it applies only to online prize promotions unless we conclude that Italian prize promotions regulations are in breach of the EU principle of freedom of services which was also part of my initial position;
- it has the consequence that the regime for prize promotions outlined above does not apply;
- it still requires to comply with Italian consumer laws, including regulations on misleading advertising that led to the € 3 million fine previously mentioned.
The position above is just in the FAQs of the Ministry, and it already happened in the past that the Ministry changed its interpretation over the years. And there is a risk that a change might occur in the coming months. Therefore, the situation shall be carefully monitored.
What happens to Italian companies running international prize promotions?
The downside of this interpretation would apply to companies based in Italy that want to run international prize promotions. Indeed, if the regulations of their place of establishment (Italy) apply, they would be prevented from running international prize promotions since Italian law requires that all the activities relating to the promotion are performed in Italy.
But this is unless we conclude that such provisions are in breach of the EU principle of services and therefore they should not apply.
It seems the end of a substantial restriction to international prize promotions, but it should not be forgotten that Italian consumer protection and advertising laws would still apply with their high sanctions.
On the topic above, you may find interesting the DLA Piper free guide on prize promotions regulations around the world.