Legal Aspect of Draws on Social Media

18.04.2021

Introduction

Draws conducted through social media platforms, primarily Instagram, are a popular method employed by individuals known as “influencers” to increase their visibility and promote the sales of the brands they endorse. In addition to influencers, small-scale sellers referred to as “boutique accounts” and even corporate brands often utilize this method to boost their recognition and sales activities. Recent sanctions imposed on sweepstakes organized by individuals, particularly those recognized as “influencers” and “phenomena”, have made this topic quite intriguing. In this article, we will explore the legal aspects of draws conducted through social media.

Draws and Their Legal Regulation

Lotteries are essentially divided into two categories: “those with cash prizes” and “those without cash prizes”. Article 41 of the Decree Law on National Lottery (“Decree”) states that “any kind of property and similar lottery and draw arrangements that are not for cash” are subject to permission from the General Directorate of National Lottery (“Administration”). On the other hand, the right to plan, organize, and arrange draws for games of chance with cash prizes belongs to the Administration. This article does not focus on lotteries of this nature but rather on those without cash prizes.

For the draws mentioned above, the most significant regulation is the “Regulation on Non-Cash Draws” (“Regulation”) prepared in accordance with the aforementioned Decree article. According to Article 4 of the Regulation, a lottery without cash prizes is defined as “all kinds of non-cash items, rights, and similar prizes that are pledged by the organizer and will be won by a draw, in which participation rights are provided by selling or giving away tickets, coupons, participation numbers, or similar items, (…) for commercial, social, charitable, or similar purposes (…).”

In addition to this, another distinction is made concerning draws: commercial, social, and charitable draws. Commercial draws are defined in Article 4 of the Regulation as “those organized by distributing tickets, coupons, participation numbers, and similar items for free, to promote, increase market share, or selling a product or service.” Essentially, in the context of draws conducted in the virtual environment, promotion, sales, or marketing is the essential element (Regulation, Article 10). Therefore, the social media draws, which are the subject of this article, mostly fall into the category of “non-cash” and “commercial” draws.

Permissions for Draws Under the Regulation

According to Article 6 of the Regulation, real and legal persons engaged in commercial activities, public institutions and organizations, associations, foundations, communities, pension and welfare funds, sports clubs, and school family associations may organize draws. If a person or organization decides to organize a draw over the Internet and social networks, it must obtain written permission from the Administration.

As mentioned above, a significant portion of social media draws constitutes commercial draws. Especially, influencers who have agreements with specific brands and conduct advertising activities for their products and services on their own social media profiles also contribute to their advertising activities by organizing draws related to these brands’ products or services. In fact, some of the advertising agreements between influencers and brands include provisions stating that a certain number of draws will be held by the influencer within specific periods. In addition to influencers, corporate brands also conduct draw practices of this nature.

To apply the provisions of the Regulation to a draw organized by an influencer or corporate brand on social media, a monetary threshold has been set. Accordingly, commercial draws that exceed the amount determined as 154 Turkish Liras per unit prize in 2021 fall under the scope of the Regulation and are subject to the permission of the Administration. On the other hand, if the unit prize amount to be awarded is below 154 Turkish Liras, the provisions of the Regulation do not apply. However, even in cases outside the scope, an obligation to obtain permission from the Administration has been introduced. When explaining draws that are outside the scope of the Regulation, this permission obligation will also be explained in detail.

To organize a non-cash draw on the Internet and social media, an individual or organization must submit their application letter and all accompanying documents to the Administration at least 15 days before the start date of the lottery. The permission granted by the Administration will only be valid for the specific scope of that permission document. Therefore, obtaining permission for a single draw does not imply that draws can be held subsequently without permission. However, in practice, for consecutive draw campaign periods determined, the Administration may grant a seasonal permit for up to six months.

Within the scope of the Regulation, there are two separate concepts: “organizer” and “executor.” Accordingly, the “organizer” is the person who organizes the draw. Therefore, the permission obtained from the Administration is obtained on behalf of the organizer. For example, if an influencer obtains permission in their own name for a draw they will organize on social media, the organizer is the influencer themselves. The “executor” is the person or entity to whom the organizer delegates the organization/execution authority for the draw. In most cases, the executor is an expert company specializing in promotional activities. In the example above, if the influencer agrees with such a company to conduct the draw, the company will assume the role of the “executor.”

In practice, the permissions obtained often show different individuals and institutions as the “executor” and “organizer.” However, the Regulation explicitly states that persons and organizations with the role of the “executor” must make the application on behalf of the “organizer” [Article 13/1-(ı)]. Therefore, in any case, the application must be made on behalf of the organizer. In the example above, if the company were to make the application to the Administration in its own name, the application would be rejected. However, in practice, it is observed that applications made by advertising companies affiliated with influencers are also accepted.

The announcement of the lottery results through a newspaper is also stipulated as a requirement. In practice, as mentioned earlier, it is often the advertising company affiliated with the influencer that obtains the draw permit instead of the influencer themselves. During the application process, these companies do not specify a newspaper for the announcement of the draw results; instead, they provide the influencer’s relevant social media account. It has been observed that permits of this nature have been issued by the Administration in the past.

For campaigns falling under the scope of the Regulation, there is also a “permit fee” determined by the Administration. There is no legal basis for this permit fee in the legislation, and the matter is regulated by an announcement published on the mpi.gov.tr website. The absence of any legal basis for such a regulation in the Regulation and other related legislation, and the creation of such a regulation solely through written announcements by the Administration, in our opinion, is contrary to the principle of legality of administrative actions. Moreover, this fee is determined with the aim of providing a partial contribution to the expenses due to the Administration’s “lack of revenue.” This amount, for each campaign period, is determined as a permit fee equal to 10% of the declared total prize value + VAT. For applications made after February 1, 2021, the minimum limit for this fee has been set at 10,000 TL + VAT.

Exceptional Cases not Covered by the Regulation

The cases excluded from the scope of the Regulation are specified in Article 2 of the Regulation. Accordingly,

a) Public institutions and organizations, associations, foundations, sports clubs, school parent-teacher associations, retirement and mutual aid funds, and congregations organizing non-cash prize draws exclusively among the participants of meetings held for entertainment, commemoration, celebration, and concluded within the duration of the meeting are not covered by the Regulation.

b) Prize draws conducted by companies to increase sales and involving incentives and gifts of a turnover nature to dealers and primary dealers are exempt from the Regulation.

c) Distributing prizes to everyone who meets pre-established and announced conditions without conducting a draw is outside the scope of the Regulation. In this context, there is no limitation on the unit amount of the prize, i.e., the amount to be given to each individual.

ç) Competitions, defined in the Regulation as “arrangements in which winners are determined based on rankings achieved through elimination among participants based on knowledge, skills, and abilities, or evaluations made by a jury using the same criteria, and which result in non-cash and/or cash prizes, as well as riddles, puzzles, entertainment programs, and the like,” fall outside the scope of the Regulation as long as no fee is charged from participants, and the competition is not aimed at marketing or selling a product or service. Competitions are not subject to any monetary limit.

d) Arrangements in which participants in a competition or similar practice are selected based on pre-announced conditions or are determined only among the candidates through a draw or lottery method in front of the candidates are exempt from the Regulation.

e) Activities related to the selection of individuals who will benefit from a right, service, or opportunity or the determination of their priority, as long as they do not include a prize commitment, are not covered by the Regulation.

f) If the value of a prize that a person can win remains below 2% of the value specified in the relevant article of Law No. 7338, the provisions of the Regulation do not apply. This amount is 154 TL including VAT for the year 2021 and is updated every January.

g) Social-purpose lotteries are also outside the scope of the Regulation. These are defined as “draws organized by public institutions and organizations for the protection and development of the public’s health, education, cultural values, and similar purposes.”

An influencer can organize a giveaway solely with the aim of increasing their follower count and visibility, without involving the promotion, sale, or marketing of a product or service. If such a giveaway offers a prize per unit valued below 154 TL and does not have a commercial purpose, the regulations of the Decree should not apply. Even if the value of each unit prize exceeds 154 TL in such a giveaway, it is our belief that the regulations of the Decree should not be applicable as there is no commercial intent, similar to the exemption cases mentioned above.

On the other hand, in the announcement dated March 29, 2020, made on the official website of the National Lottery Administration, it is stated that permission must be obtained for the activities carried out on social networking sites, whether they are within the scope of the Regulation or not. Therefore, it will be necessary to notify the Administration and obtain written authorization pursuant to Art. 7/2-(b) of the Regulation for the activities that fall outside the scope. It is understood that this is the result of a broad interpretation of Article 41 of the Decree. However, in our opinion, imposing a notification obligation for those who are outside the scope of the Regulation, as well as the obligation to pay for the permit and the procedure, is contrary to the principle of legality of administrative actions. The cost of the written authorization in question was determined as 5,000 TL + VAT for each application in 2021. The only exception that does not require a permit among the practices excluded from the scope is the activity of “giving bonuses to everyone who fulfills certain conditions” under Article 2/(c).

Penalties for Failure to Obtain Permission

The main sanction for not obtaining permission for a draw, as well as prohibited acts and behaviors under the Directive, is a prohibition from organizing draws for two years. Especially when applied to companies, this sanction will apply to all brands of the company. In case of a repeated offense, the sanction has been set at four years.

In addition, the Decree also stipulates judicial fines and imprisonment penalties. According to the relevant provision, persons who do not obtain permission from the Administration, who obtain permission but do not conduct the draw subject to the permission, who do not announce the results of the draw, or who do not fulfill their draw commitment may be sentenced to a judicial fine from one hundred thousand Liras to ten million Liras and imprisonment from two months to two years. In practice, the Administration usually notifies the institution or person committing the act or behavior in question to immediately stop such act or behavior, and in case of failure to do so, the local authority is notified. If deemed necessary by the local authority, legal proceedings are initiated. In the continuation of the investigation and prosecution phases that may be initiated within this scope, the above-mentioned penalties are imposed by the court.

Sonuç

Social media-hosted contests are primarily regulated by the Regulation on Non-Cash Draws. The majority of contests on social media fall into the categories of “non-cash draws” and “draws for commercial purposes” as defined under this regulation.
The General Directorate of National Lottery Administration is authorized to authorize and supervise all kinds of non-cash draws. Therefore, any draw organized by a person or organization in the virtual environment is subject to permission under the Regulation.
Draws that fall under one of the exceptions listed in the Regulation or that do not meet the conditions are also subject to authorization, although there is no basis in the legislation. Therefore, even if they do not meet the conditions, draws conducted on social media will be subject to a permission procedure, which is more of a notification in technical terms.
Recently, the General Directorate of National Lottery Administration has increased its measures in terms of draw permits. For this reason, the sanctioning processes for people referred to as influencers or phenomena have accelerated.
In particular, the inspections carried out by the security directorates can pave the way for serious sanctions against those who address large masses on social media. For this reason, whether or not it is covered by the Regulation, legal permissions must be obtained and caution must be taken in terms of draws held on social media.