In Italy 'prize contests' fall into the category of sales promotions, governed by a special Regulation (i.e. Presidential Decree no. 430 of 2001) and subject to supervision and control of the Ministry for Economic Development. Such Regulation governs local promotional initiatives "... of any kind, when consisting in promises of premiums to the general public and aimed both, at promoting, within the territory of the State, awareness about products, services, companies, brands, logos or trademarks as well as sales of certain products or supply of services, ...". It also sets a list of exemptions with respect to certain initiatives not subject to the legal and administrative requirements usually applying to sales promotions.
Among other cases (e.g. when prizes awarded consist in items of minimum value, i.e. gadgets such as a flag, a key ring, a pocket calendar, etc.), this exemption list refers also to "...contests announced for the production of literary, artistic or scientific works, as well as for the presentation of projects or studies in the areas of commerce or industry, where prize awarding to the author of the selected project is meant to reward the service or work performed or to acknowledge personal merits achieved or to result in an encouragement in community's collective interests ...".
In the past, the State Department used to take the view that promotional initiatives consisting in 'contests', based on participants skills (e.g. in preparing and submitting a story, a video or other materials, commonly known as 'user generated content') had to be considered as 'ordinary promotions', subject to all the legal and administrative requirements set in Presidential Decree no. 403 of 2001.
Recently the State Department's offices seem to have changed their mind on this specific aspect. In a memorandum, published a few weeks back, they have signaled a new approach to the advertising and marketing industry. The State Department reminds that already in the past 'prize contests' requiring participants to submit content created on their own in order to achieve a chance of winning a prize resulted covered by the exemption on condition that:
- No purchase was required for participating to the contest,
- Prizes assigned to winners were intended to reward "the service or work performed or to acknowledge personal merits achieved or to result in an encouragement in community's collective interests ..." (as to the latter case, the memorandum cites the following examples: an article or essay on topics such as tobacco dependence, drug addiction, chronic alcoholism, ecology, a particular individual literary talent – e.g. skills in the use of ancient Latin – or a paper on topics of social interest).
In its November memorandum the Department acknowledges that several big companies – doing business on a multi-national level and active in the sector of information technology – had flagged their discomfort in relation to promotional initiatives/skill contests, not linked to a purchase, but soliciting participants to submit their individual projects or studies for developing technological solutions or applications and rewarding the best contributions received with prizes, meant to acknowledge authors' personal merits or to encourage submission in the community's collective interest. While such contributions could theoretically be assigned to a 'commercial or industrial context', promoters usually restrain from undergoing any specific obligation as to actual use of the technological solutions submitted by participants. The uncertainty surrounding such initiatives as to their compliance obligations with the requirements laid down in Presidential Decree (or as to coverage by the exemption provisions set in Article 6) frequently had induced international companies to exclude Italian residents from participation to such skill based prize contests.
Without any further explanation on the legal basis of its view, the State Department's offices now indicated that the above-mentioned initiatives are to be considered as covered by the exemption from the legal and administrative requirements set by Presidential Decree no. 430 of 2001 for sales promotions.
So far, so good, but unfortunately the State Department's 'explanatory memorandum' leaves the marketing industry with a (not exactly helpful) case-by-case approach, without much needed, clear and easy to understand indications on how to handle prize contests based on user generated content.
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