December 15 2011
This update summarises the Russian legal requirements for various types of advertising that may be relevant when planning promotional activities, such as contests and sweepstakes.
The Law on Advertising covers the advertising of promotional activities. Among other things, it contains a prohibition against advertising that is incorrect or misleading in respect of value, price, amount of discount or conditions of purchase. Each advertisement must be compliant on its face. Thus, the omission of material information is considered misleading and the mere provision of external means of obtaining further information (ie, a telephone number or a reference to a website) cannot cure a misleading advertisement. Recent examples of advertisements that were found to be misleading due to material omission include:
Furthermore, the law stipulates that:
Offering discounts is generally permissible within the limits of the Law on Advertising. However, a few products - primarily alcoholic beverages - are subject to minimum prices under Government Regulation 239/1995.
Joint and tied sales
A joint sale is an offer to provide certain goods or services at a discounted price, or for free, if the buyer purchases other goods or service. A tied sale is similar, except that the discounted (ie, tied) product is usually packaged with the other product, so that the buyer cannot purchase one product without the other. Joint sales are permitted in Russia, but tied sales are not.
A promotional contest where winning is not solely a matter of luck, but also requires some minimal skill, is deemed a 'skill contest', or simply a 'contest'. The contest must be for a "socially useful purpose": sales promotions meet this qualification. The contest and all rules must be publicly announced, disclosing:
Once a contest has been announced, the organiser may change the rules or cancel the contest only if less than half the time has elapsed between the announcement and the deadline for participation. Any such change or cancellation must be made by the same means as the original announcement. The organiser must reimburse the expenses of participants who entered before learning of the rule change or cancellation; otherwise, it must award prizes to such participants as if the rule continued to apply unchanged.
If, in the course of participation, contestants produce items of value, the organiser must return such items to non-winners, unless the rules of the contest provide otherwise.
A sweepstake is a type of lottery in which prizes are awarded by, and at the expense of, the sweepstake organiser. Sweepstakes are permitted in Russia, but are strictly regulated by the Law on Lotteries. The law includes certain general prohibitions. For example, it states that:
Before the sweepstake commences, the organiser must submit a set of notification documents to the competent tax authorities. It must disclose:
In addition, the organiser must confirm that it owes no back taxes. On receipt of this information, the tax authority must either issue a state registration number for the sweepstakes or notify the organiser that the sweepstake is prohibited. A sweepstake may be prohibited if the notification documents are inadequate, if they contain false or misleading information, or if the organiser owes back taxes.
All advertising regarding sweepstakes must state:
Sweepstake advertising may not state or imply that a prize is guaranteed unless every participant wins a prize and can claim it. When winners are announced, they must actually receive the prize as promised.
Sweepstake organisers are also subject to the Law on Combating Money Laundering and Terrorism Financing. Organisers must register with Rosfinmonitoring, the anti-money laundering authority, and keep the authority informed of its financial operations. Court practice regarding money-laundering requirements is not uniform. Some courts interpret the law to mean that only sweepstake organisers are liable for violations; however, other courts have found sweepstake operators to be liable as well. Although some decisional practice suggests that the law applies only to organisers who are regularly involved in sweepstake activity, Rosfinmonitoring considers that the law applies to any company that acts as an organiser, even on a one-off basis.
Russia has a well-established legal framework for advertising and promotion. The general 'truth in advertising' requirements are straightforward and compliance is simple. However, the regulations for contests and sweepstakes are strict and present more of a challenge. In order to minimise the potential administrative and procedural difficulties and mitigate the risk of significant financial penalties for violations, many companies - both Russian and foreign - enter into contracts with specialist organisers.
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