The sweepstakes have become an increasingly popular way to promote products and services in Turkey. When this is the case, the rules and principles in order to organize sweepstakes became an important issue for the businesses who intend to conduct a promotion in order to market their products and services.
The most common types of promotional sweepstakes are competitions and prize draws, which will be explained in detail below. The National Lottery Administration ("NLA") has strict rules governing the mechanisms by which cash and non-cash prizes are awarded in Turkey. The Regulation on Lotteries and Drawings for Non-Cash Rewards No. 26309 (the "Regulation"), the Decree Law outlining the duties of the General Directorate of NLA, grants the institution the sole authority to organize games of luck and lotteries with cash rewards.
However, businesses are permitted to award non-cash prizes, provided that certain conditions are met. Lotteries in which the value of the prize does not exceed TL 49.62 (approximately € 25.00) need not seek official permission from the NLA. If the value of a prize awarded in a prize draw, lottery or game of luck exceeds the amount mentioned above, then permission from the NLA will be required. To participate in both contests and prize draws, all participants are required to be at least 18 years of age.
Article 2 /c, ç and d details the exemptions to the Regulation; the promotional mechanisms that meet these criteria do not require permission from the National Lottery Administration (the "NLA"):
- 2/c: Mechanisms in which each participant who meets previously specified criteria is awarded a prize,
- 2/ç: Contests in which no entrance fee is charged and that do not promote or sell a particular good or service, and
- 2/d: Contests and similarly organized events in which no drawing occurs and the winners are selected according to previously specified rules, or those in which the winners are selected by means of a drawing held before all participants.
When organizing promotional sweepstakes businesses typically try to formulate the contest so as to qualify for one of these exemptions and eliminate the need to seek the official permission of the NLA. The most common mechanisms used to eliminate the requirement of the official permission of the NLA is either determining the value of the non-cash prize of a lottery or draw under the specified amount or arranging the mechanism as a contest (and not involving any draws in the mechanism) in order to be able to give cash prizes as it will fall outside the scope of the Regulation.
Coming to the possible sanctions in case of any violations under the Regulation, NLA is entitled to inform the competent governorship of the unauthorized promotion, lottery or drawing and claim the stopping of such organizations whereby the NLA can also make public announcements regarding the unauthorized organizers. In addition, the NLA is entitled to prohibit the violators of the Regulation from conducting lotteries, prize draws and promotions for a period of up to two years after the initial violation. The NLA may also request that the Supreme Council of Radio and Television in Turkey halt the broadcast of promotions deemed in violation of the regulations.
The two most common promotional mechanisms in Turkey are prize contests and prize draws.
Competitions organized on television or radio, or in malls or businesses must meet the following conditions in order to circumvent the need for NLA involvement.
According to the Regulation, a contest consists of "events in which winners are determined according to the degree of knowledge and skill displayed by the participants and by elimination, depending on the degree of success at a task or a particular set of tasks, or by a jury selected to evaluate performance, the puzzles, riddles, entertainment programs etc. at the end of which an in-kind and/or cash prize is given."
The requirements must be such that chance factor should not be involved in the contest; skill or qualification should be necessary in order to win whereby the winners are selected by the elimination method considering their success degrees. Article 2/ç of the Regulation mandates that competitions cannot serve solely to promote or sell a particular good or service in order to qualify for the exemption. This exemption also does not apply to prize contests for which a pre-condition of entry is payment or purchases of any kind.
As promotional contests have become more and more popular, the NLA has taken an increasingly strict regulatory attitude and tends to consider most of these promotional mechanisms as within its regulatory purview.
The authority of the NLA in these cases hinges upon the phrase "do not serve the purpose of the promotion or sale of a certain good or service" in the definition of "contest". Until recently, NLA representatives had narrowly construed this phrase for determining its regulatory authority over such mechanisms. However, the NLA has begun to consider any promotional mechanism in which the promotion of a certain product or service is somehow purposed and that every person does not have an equal chance to participate and win the prize (for example, a contest or prize draw limited to the consumers of a certain product or service) to fall within the scope of its authority. In such cases, the NLA usually proposes that the organizers add a prize draw, since the addition of this sort of prize drawing automatically renders NLA involvement necessary. For instance, NLA used to construe the mechanisms which involve the participation of specific bank card holders in a contest as infringing the equal participation principle and on purpose of promoting the usage of a certain bank card; therefore did not regard it as a contest.
But the regulatory stance of the NLA can differ depending on the type of the mechanism organized. Several campaigns have recently been launched by banks or other businesses that hinge upon the stipulation that "those __ number of participants who make the biggest transaction/biggest shopping spree using ... cards, etc." These campaigns have been held to fall outside the purview of the NLA, and were launched (some of them are still ongoing) without the NLA's permission and supervision.
Foreign entities organizing promotional contests from outside of Turkey to attract Turkish customers need not do so from an entity established in Turkey, but Turkish consumer protection laws mandate that the participants be able to contact the organizing company if necessary. Besides, since the promotion targets Turkish citizens, the terms and conditions must be prepared in Turkish and understandable for the Turkish participants in order for the contest to be in compliance with Turkish Consumer Protection Law.
The Regulation defines a prize draw as "the selection of a winner from among participants at the final stage of a promotion by way of lots of which the principles have been approved by the NLA." If the promotional sweepstakes is to include a prize draw and the value of its non-cash prize awarded exceeds the specified limit, then the sweepstakes will definitely fall within the scope of the Regulation and require the NLA's involvement.
It is possible for the organizer to set out the terms and conditions of the promotion –so long as they are in compliance with the NLA rules for the prize draws. The same rule for the prize contests also applies for prize draws organized by foreign entities targeting the Turkish participants from outside of Turkey.
When organizing a prize draw in Turkey, the organizer foreign entity usually works alongside a local agency or business associate in Turkey to facilitate the application to the NLA. Whether or not the foreign entity has a branch office in Turkey, if the promotion is to be organized in Turkey the Regulation will apply.
It is also possible to arrange a two-stage promotional mechanism: one part prize draw and one part competition. For instance, there may be a skill based contest at the beginning of the mechanism and the participation is satisfied by the contest. Afterwards there may be a draw involved in the mechanism in order to determine the winners of which the names are randomly selected. In such cases, the competitive round must comply with Article 2/ç of the Regulation, that is, the contestants should be charged no entrance fee and the contest should not directly serve to promote the sale of a particular good or service. As for the prize draw part, the above-mentioned rules apply: if the monetary value of the prize exceeds the specified limit, then the official permission from the NLA will be required.
Though promotional sweepstakes are an increasingly popular marketing technique, in the interest of limiting the number that occurs, the NLA has adopted an approach designed to restrict the number of promotional sweepstakes that can be approved in order to prevent the uncontrolled increase of the promotions in the market. . Moreover, the NLA has begun to insist that any promotional sweepstakes that do not qualify for the exemptions and are subject to its approval be supervised to the greatest possible extent, which became a matter of worry for the companies. As a result of this approach, businesses typically prefer the less supervised competitions to the more regulated prize draws. However, since the value ceiling for non-cash prizes has been set very low in the Regulation, it has become more and more likely that in order for promotional sweepstakes to be successfully organized, the official permission and oversight of the NLA will be required which means loss of time and lot of paperwork for the organizer companies.
The regulatory approach of the NLA can be justified to an extent, considering the sheer increase in the number of promotional sweepstakes in Turkey. These promotions are often misleading, and can violate consumer rights if not properly supervised. Besides, the businesses usually try to formulate their mechanisms in the form of a contest or other exceptional mechanisms in order to eliminate NLA's involvement in the promotion. That's why NLA scrutinizes the promotion mechanisms to be completely in compliance with the rules under the Regulation and to prevent any abuses in formulation of the mechanisms.
As far as the more complex promotional campaigns are concerned, if there is any legal uncertainty whatsoever it is advisable to make a formal application to the NLA defining the proposed promotional mechanism in order to have their prior opinion before launching the promotion. The NLA itself suggests that applicants proceed according to this system, and will respond to applicants within 3 to 4 days with a determination as to whether their promotional sweepstakes are in compliance with the regulations. This system enables businesses to ensure their promotional mechanism will be permitted to go forward before their launch and by this way to be on the safe side both commercially and legally.
We are of the opinion that the Regulation should be amended, especially with respect to the value ceiling for the non-cash prizes. If the limit were increased, prize draws would be easier to promote, thereby decreasing the workload of the NLA. Considering the dynamics of the market and the consumer needs, a limit of TL 49.62 is very low and the value of the committed prize usually exceeds this limit. The value ceiling makes it advisable for companies to refrain from organizing prize draws and inhibits their marketing plans and strategies.
Lastly, both the guiding principles and the specific rules in the Regulation for the organization of promotional contests should be laid out in greater detail as the legal gaps on this issue lead the NLA to interpret the existing regulations to a greater extent than should be necessary and to narrow the scope of the term "skill based" contest in order to be involved in the promotional mechanism as much as possible. It is essential that the Regulation be amended in order to better balance the interests of the companies organizing the promotions and the interests of the targeted consumers.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.