Introduction

In market economy, operators often conduct prize sales to attract consumers and expand sales. Legitimate prize sales help convert potential purchasing power into actual purchasing power and positively contribute to prosperous market economy. However, unlawful prize sales may deceive and mislead consumers, damaging consumer rights, or destroy fair competition order, damaging competitors’ interests, and may even harm formation of good social atmosphere and to some extent damage national interests. This article mainly discusses legal concepts of prize sales, three statutory situations of unlawful prize sales and judicial practice, and provides two compliance suggestions for operators conducting prize sales.

I. What is Prize Sales

According to Article 2 of the State Administration for Industry and Commerce’s Certain Provisions on Prohibiting Unlawful Prize Sales Competition Behaviors (effective December 24, 1993, now superseded by the Interim Provisions on Regulating Promotional Activities):

“Prize sales as referred to in these Provisions means the behavior where operators sell goods or provide services,附带性地向购买者提供物品、金钱或者其他经济上的利益.”

However, with development of market economy especially internet economy, new promotion models like “free gifts upon entry,” “scan QR code for gifts,” and “follow for gifts” not directly linked to sales emerged, creating challenges for traditional regulatory concepts.

In response, the State Administration for Market Regulation’s Interim Provisions on Regulating Promotional Activities (effective December 1, 2020) Article 11 provides:

“Prize sales as referred to in these Provisions means the behavior where operators以销售商品或者获取竞争优势为目的，向消费者提供奖金、物品或者其他利益的行为，包括抽奖式和附赠式等有奖销售.”

This shows that besides selling goods or providing services, gaining competitive advantage can also constitute prize sales.

II. Three Statutory Situations of Unlawful Prize Sales

Article 10 of the Anti-Unfair Competition Law provides that operators conducting prize sales shall not have the following situations:

“(1) Information about prize types, conditions for redemption, prize amounts, or prizes not clear, affecting redemption;

(2) Conducting prize sales through deceptive methods such as falsely claiming prizes or intentionally letting predetermined persons win;

(3) For prize-type prize sales, the maximum prize amount exceeds 50,000 yuan.”

A. Unclear Prize Sales Information

Some operators故意对所设奖的种类、兑奖条件、奖金金额或者奖品等信息不作明确清晰的表述，在消费者兑奖时制造困难.

For example, operators advertising特等奖为汽车一辆 but later claiming it is only five-year usage rights constitutes unclear information.

B. Deceptive Prize Sales

Deceptive prize sales include falsely claiming prizes and intentionally letting predetermined persons win.

Falsely claiming prizes includes claiming prizes exist when none do, claiming big prizes when only small prizes exist, or claiming free prizes when payment is actually required.

C. Excessive Prize Sales

Following China’s economic development level changes, the 2017 revision adjusted the maximum prize amount from 5,000 yuan to 50,000 yuan.

Excessive prize sales have以下弊端: distort consumer choices, inflate costs ultimately borne by consumers, and interfere with normal business operations of other operators.

III. Compliance Suggestions

Operators should:

1. Conduct legitimate prize sales, comply with Anti-Unfair Competition Law, clarify prize sales information, avoid false promotion, avoid manipulating lottery results, and avoid exceeding 50,000 yuan maximum prize amounts.

2. Focus on personal information protection, comply with Personal Information Protection Law and Cybersecurity Law, clearly告知消费者收集信息的目的、方式、范围, and建立信息安全管理制度.