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September 21, 2012

Legal Requirements for Lucky Draws

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Bangkok Post, Corporate Counsellor Column

Online lucky draw campaigns are becoming one of the more popular marketing tactics to promote brands and products, as consumers are attracted to the promise of free goods and services, and internet users can quickly pass along links to friends via social networking. Lucky draws or other sweepstakes-type contests have the added bonus of being easy and cheap for companies to arrange.

However, even though draw campaigns have become a common marketing approach, many people are unaware that if a prize draw is to be held in Thailand or if the participants are located in Thailand, it would require a license, without which the party awarding the prize or gift could face criminal penalties.

Pursuant to Section 8 of the Gambling Act of 1935, a license for a lucky draw is required for those who wish to arrange for complimentary gifts or prizes to be awarded, including a draw in any manner relating to business campaigns or occupations. The arrangement of a draw without a license can result in imprisonment of up to one year and/or a fine of THB 2,000.

In addition to the license requirement, draw prizes must be given on a random basis and the draw must be held for business purposes. Even receiving an indirect benefit from holding a draw could be considered for commercial purposes, and the license is still required.

The selection process for the winner must take place physically and publicly in Thailand and in the presence of witnesses; selection by a computer or other automated means is strictly forbidden. Prizes must not be illegal, be against good morals, or be harmful to the public or national security.

With these conditions as listed above, the question arises as to the practical arrangement of the draw, given that the process cannot be automated. For example, even if participants take part via Facebook or another social networking website, the organizer has to print out participants’ information from the data system, put the information in a container, shuffle, and select the winner by hand.

Moreover, details of the prizes (such as the type of prize and value) must be provided to the public. Cash or cheques cannot be awarded as a substitute for the prize specified in the license; and if the prize is valued at more than THB 1,000, it is subject to 5% withholding tax, which will be deducted from the prize’s value.

If the draw is held in Bangkok, the license application must be submitted to the Provincial Administration Department, whereas if the activities are held outside Bangkok, the application must be submitted to the chief district officer of that locality.

The processing time for a license application is at least 15 working days and the permit fee depends on the length of the event, as the below table shows.

The Cost of Lucky Draws – Permit fees vary by length of events
License Validity 1 day 7 days 1 month 6 months 1 year
Fee (THB) 300 600 1,500 6,000 9,000

Once the winner has been chosen, a report specifying the details of the winner must be submitted to the department or the chief district officer of that locality, as the case may be.

In addition, advertisements for lucky draws must conform to the requirements under the Consumer Protection Act of 1979 and the ministerial regulations issued under the Act. The promotion organizers, for instance, are required to give clear information regarding the conditions of the offer, terms and conditions of the draw, entry period and ending dates of the offer, details of the prize and its value, date and time of the draw, advertising media to announce the name of the winner, etc.

Failure to include all of the above information in the advertisement will result in it being deemed as an unfair advertisement, which could be considered as violating the Consumer Protection Act, in which case the Advertising Board will take actions against the offending advertisers.

Any advertiser that does not comply with the laws and regulations mentioned above shall be liable to jail of up to six months and/or a fine of up to THB 50,000.

Even though businesses have the freedom to carry out lucky draws, organizers should be aware that holding a draw campaign or other similar activities from which the organizer receives direct or indirect benefits, whereby the prizes will be given on a random basis without prior permission of the local authority, is illegal.

Realistically, some people break these rules as they (wrongly) believe lucky draws are unlegislated and the risk of arrest for offenders is minimal. However, if you are organizing or thinking about organizing a draw campaign, you should consider the above rules and regulations, as violators could be subject to criminal liabilities

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