Prize contests: changes to the Italian sanctions regime

With the entry into force of the Italian Finance Law ("Legge di stabilità", Law no. 208 of 28 December 2015) on 1 January 2016, the Italian legislator amended the sanctions framework provided in the event of prohibited prize contests, by partially (and perhaps properly) re-thinking the choice carried out some years ago in the context of the economic measures aimed at funding urgent interventions in favor of people affected by a earthquake in the Abruzzo region.

On April 2009 a specific provision was in fact introduced (article 12, paragraph 1, lett. O) of the Law Decree n. 39 of 28 April 2009, converted into Law no. 77/2009, so-called "Abruzzo Decree"), then taken over in an implementing Decree of 2010 jointly signed by the Ministry of Economy and Finance and Independent Authority for the Administration of State Monopolies, which provided an administrative sanction of an amount between € 50,000 and € 500,000 in the event of conducting a prize contest or a prize competition prohibited under article 8, paragraph 1, of the Presidential Decree n. 430/2001.

The sanction was doubled if the prize contest was continued even after the prohibition, without prejudice to the faculty of the infringer to obtain a sanction reduction the amount to 1/6 of the maximum paying within 30 days of notification (€ 83,333.33 in case of simple violation, € 166,666.67 in case of continuation of the event).

In addition to pecuniary sanctions, the old regime provided also a supplementary sanction consisting of publishing, at expense of the promoter and on media identified by the Ministry of Economic Development, a notice on the prohibited prize contest.

The sanction was also extended to all those who, without being promoters of the initiative, in any way took part in the distribution of the advertising/information material regarding the prize contest.

Such sanctions regime could thus be applied, in principle, against a wide range of subjects, including promoters as well as intermediaries. Furthermore, the old sanctions regime provided wide and varied cases of prohibited prize contests: from the prize contest with a promotional structure unsuitable to ensure the public trust or the equal treatment to the prize contest with a deceptive setting promotional mechanism as well as hypothesis of disturbance of competition, circumvention of the State Monopoly on games and bets, and, in more general in the event of any violations of the requirements provided under the above mentioned Presidential Decree n. 430/2001 (with the exception of the violations regarding the non-submission or late submission of the communication to be done before the prize contest begins or in the event of a prize contest carried out with modalities other than those provided under the related regulation.

It followed an harsh and possibly unfair sanctioning regime, in particular for the smaller entrepreneur entities and for the subjects that were involved in the activity of spreading  material regarding to a prize contest subsequently considered forbidden (e.g. the case of a small commercial entity that provides its customers the advertising material regarding a prize contest promoted by a multinational group).

The Legge di Stabilità 2016 intervenes in order to provide a remedy for the situation described above.

It is indeed provided a new paragraph 1-bis to Article 12 of the abovementioned "Abruzzo Decree", establishing that the sanctions there provided are applicable exclusively to the prize contests for which it is ascertained the coincidence with the gaming activities reserved to the State or the elusion of the State monopoly on games (Article 1, paragraph 924 of the Legge di Stabilità).

For the other violations it is instead reestablished the previous, and less burdensome, sanctioning regime, that is a monetary sanction consisting in a lump sum from 1 to 3 times the VAT owed, for an amount in any case not lower than 2.582,28 € and, in case of prosecution of the forbidden manifestation, from 2 to 6 times the VAT owed for a minimal amount not lower then 5.164,57 €. It remains steady for these hypotheses the applicability of the additional sanction consisting in the order of publication already provided autonomously by Article 124, paragraph 1, of the Royal Decree No. 1933 on October 19, 1938, converted by the Law No. 973 of June 5, 1939, as substituted by Article 19, paragraph 5, letter c) of the Law No. 449 of December 27, 1997.

Lastly, it is important to point out that this amendment has retroactive effect being applicable also with reference to sanctions already issued, but not definitive, being them appealed or still capable to be appealed, at the date of entry in force of the Legge di Stabilità. The relevant sanctions will be automatically re-determined by the competent authorities (Article 1, paragraph 925 of the Legge di Stabilità).

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