The Legal Aspect of Giveaways Conducted on Social Media
Sweepstakes 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 sweepstakes conducted through social media.
Lotteries 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 (“KHK”) 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 lotteries mentioned above, the most significant regulation is the “Regulation on Lotteries and Draws without Cash Prizes” (“Regulation”) prepared in accordance with the aforementioned KHK 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 lotteries: commercial, social, and charitable lotteries. Commercial lotteries are defined in Article 4 of the Regulation as “those organized by distributing tickets, coupons, participation numbers, and similar items for free, with the aim of promoting, increasing market share, or selling a product or service.” Essentially, in the context of lotteries conducted in the virtual environment, promotion, sales, or marketing is the essential element (Regulation, Article 10). Therefore, the social media lotteries, which are the subject of this article, mostly fall into the category of “non-cash” and “commercial” lotteries.
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According to Article 6 of the Regulation; individuals and legal entities engaged in commercial activities, public institutions and organizations, associations, foundations, religious communities, pension and mutual aid funds, sports clubs, school parent-teacher associations can organize lotteries. If an individual or organization decides to organize a lottery via the internet and social networking platforms, they are required to obtain written permission from the Administration.
As mentioned above, a significant portion of social media lotteries constitutes commercial lotteries. 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 lotteries 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 lotteries will be held by the influencer within specific periods. In addition to influencers, corporate brands also conduct lottery practices of this nature.
To apply the provisions of the Regulation to a lottery organized by an influencer or corporate brand on social media, a monetary threshold has been set. Accordingly, commercial lotteries 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 lotteries that are outside the scope of the Regulation, this permission obligation will also be explained in detail.
To organize a non-monetary lottery 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 lottery does not imply that lotteries can be held subsequently without permission. However, in practice, for consecutive lottery 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 lottery. 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 lottery 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 lottery. In most cases, the executor is an expert company specializing in promotional activities. In the example above, if the influencer enters into an agreement with such a company to conduct the lottery, 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 lottery permit instead of the influencer themselves. During the application process, these companies do not specify a newspaper for the announcement of the lottery 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 in accordance with 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 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.
Excptional Cases Not Covered bt 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.
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.
Social purpose lotteries are also outside the scope of the Regulation. These are defined as “lotteries 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 Directive 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 Directive should not be applicable as there is no commercial intent, similar to the exemption cases mentioned above.
However, in a notice dated March 29, 2020, published on the official website of the National Lottery Administration, it is stated that permission is required for activities conducted on social media platforms, regardless of whether they fall within the scope of the Directive. Therefore, for activities that fall outside the scope, notification should be made to the Administration, and written permission should be obtained in accordance with Article 7/2-(b) of the Directive. It appears that this situation has arisen as a result of an extensive interpretation of Article 41 of the Decree. However, in addition to the obligation to notify for activities falling outside the scope of the Directive, the requirement for a permission fee and procedure, in our opinion, is in violation of the principle of legality of administrative acts. The fee for this written permission, in the case of applications made after February 1, 2021, has been determined as a minimum of 10,000 TL + VAT for each application. The only exception among activities falling outside the scope that does not require obtaining permission is the activity described in Article 2/(c), which states “offering prizes to anyone who meets certain conditions.”
Penalties for Faliure to Obtain Permission
The main sanction for not obtaining permission for a lottery, as well as prohibited acts and behaviors under the Directive, is a prohibition from organizing lotteries for a period of two years. Especially when applied to companies, this sanction will be applicable to all brands of the company. In case of a repeated offense, the sanction has been set at four years.
Additionally, within the scope of the Decree, criminal fines and imprisonment are also envisaged. According to the relevant provision, individuals who do not obtain permission from the Administration, do not conduct the lottery subject to permission, do not announce the lottery results, or do not fulfill the lottery commitment may be subject to a criminal fine ranging from one hundred thousand to ten million Turkish Liras and an imprisonment sentence of two months to two years. In practice, the Administration usually issues a notification to the institution or individual involved in the said act or behavior, requesting an immediate cessation of the act or behavior. In case of non-compliance, a notification is made to the local authority, and legal proceedings are initiated if deemed necessary. Within the framework of these investigations and proceedings, the court may impose the penalties mentioned above.
- Social media-hosted contests are primarily regulated by the Regulation on Non-Monetary Lotteries. The majority of contests on social media fall into the categories of “non-monetary lotteries” and “lotteries for commercial purposes” as defined under this regulation.
- All authority for permits and oversight related to non-monetary lotteries is vested in the General Directorate of National Lottery. Therefore, any contest organized by an individual or organization in the virtual realm falls under the purview of the Regulation and requires permission.
- Contests that fall under the listed exceptions or do not meet the criteria, although lacking a legal basis in legislation, still require permission. Thus, contests conducted via social media, even if they do not meet the criteria, will technically be subject to a permission procedure that is more in the nature of a notification.
- In recent times, the General Directorate of National Lottery has increased its precautions regarding lottery permits. Consequently, enforcement processes concerning individuals referred to as influencers or celebrities have gained momentum.
- Particularly, inspections carried out by law enforcement agencies have the potential to lead to significant penalties for individuals who address large audiences on social media. Therefore, whether or not they fall under the Regulation, it is imperative to obtain legal permissions and exercise caution in the context of contests conducted on social media platforms.