Who: French legislators
When: 17 March 2014
Law stated as at: 3 June 2014
Act n°2014-344 of March 17, 2014 on consumer law, which introduced class actions and implemented the Consumer Rights Directive, also reformed the rules applying to promotional prize draws and contests.
With respect to contests, the new Act has introduced a major change. Indeed, from now on pure skill contests will have to be 100% free meaning that sponsors would not be able to make it a condition of entry into a pure skill contest that there must be a purchase or payment of a fee.
Pursuant to new article L. 322-2-1 of the National Security Code, skill games which require a financial contribution from the participant are now prohibited.
The existence of a “financial contribution is established when the sponsor requests an advance payment from the participants, even if a future reimbursement is possible pursuant to the rules of the game”.
Financial contribution includes internet connection fees even if the rules provide that such fees may be reimbursed to the consumer. On this point and quite surprisingly, however, please note that pure skill contests organised in relation to TV, radio programs or in printed press that impose premium communication or connection rates will not be regarded as requiring any financial contribution and will therefore not fall foul of this prohibition.
Breach by a company of article L. 322-2-1 of the National Security Code may be punished by a fine up to 450.000 Euros.
With respect to prize draws, the new Act now expressly states that prize draws can be subject to the payment of communication or connection fees as long as those fees are not premium rate ones (article L. 121-36-1 of the French consumer code).
However, Article L. 121-36-1 of the French consumer code provides that “These costs can be borne by the consumers provided that the possibility to be reimbursed of those costs is included in the rules of the operation and that the consumers are informed of this possibility beforehand“.
Therefore if participation in a prize draw is subject to communication or connection fees, the consumer will need to be informed beforehand of the possibility to be reimbursed of such fees. This means that:
– either this reimbursement possibility will have to be specified in the rules and those rules will need to be expressly accepted by the consumer before participation; or,
– the consumer will have to be expressly informed of the possibility to be reimbursed on the website page of the promotion.
Please note in addition that companies failing to comply with rules on prize draws may be sanctioned with a 75.000 euros administrative fine (article L. 121-41 of the French consumer code).
Why this matters:
This new prohibition of non-free pure skill contests will have a significant impact on the marketing policies of businesses targeting French consumers, who, for the time being, will have to review carefully their plans with a view to:
– either rendering the contest completely free – which seems difficult as even the payment of connection fees is prohibited – or,
– introducing an element of chance in future pure skill contests so that these contests are considered as permissible promotional activities not falling within the scope of the prohibition, at least until French/European Courts or French competition authorities (DGCCRF) rule on the subject, for the reasons given below.
The new rule is questionable and will likely be challenged for lack of compliance with Directive 2005/29 on business to consumers unfair commercial practices given that promotional contests requiring a financial contribution are not deemed unfair per se under this Directive.
As a consequence, it cannot be excluded that French law may change again in the future, especially as it was not the legislator’s intent to ban promotional contests by adopting aforementioned article L. 322-2-1 of the National Security Code.