PRIZE PROMOTIONS AROUND THE WORLD Chile

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ABOUT

Welcome to the fourth edition of DLA Piper's popular Guide to Prize Promotions Around the World. Prize promotions remain a popular tool used globally by businesses to attract customers. The internet and various social media platforms make this an attractive, cost efficient means of reaching a large, multi-jurisdictional customer base; but it is not without its legal challenges.

This handbook is designed to equip our clients with a useful tool to assist them with the management of the early development stages of a , and to bring potentially problematic issues to their attention as soon as possible.

NEW FEATURES AND TRENDS

In response to client demand, this fourth edition of the Guide has been expanded to cover 39 jurisdictions which count among the most significant for our clients, with the addition of Denmark, Hungary, Nigeria and Turkey.

As our interactive map shows, the extent of regulation and sanctions in this area is on the rise, with the most noticeable change being brought about by the introduction of GDPR across the EU. GDPR extends obligations around handling promotion entrants’ personal data (eg for winner , use of promotions to generate marketing leads and use of UGC entries containing personal data), and introduces the possibility of huge fines for breaches of those obligations.

ABOUT OUR GLOBAL AND MARKETING TEAM

The DLA Piper global advertising and marketing team is well-versed in handling complex, frequently multi-jurisdictional compliance projects. This includes advising on compliance aspects of international prize promotions, which we are often asked to clear across large numbers of jurisdictions, while working to short deadlines.

More broadly, our global advertising and marketing team is able to support the full range of advertising-related work, from copy clearance to dealing with advertising regulators and litigation, to negotiating advertising and sponsorship deals, to e-privacy issues and ad-tech. Our advertising and marketing lawyers offer deep understanding of the advertising and media industries, and combine this with a sophisticated approach to cross-border working.

DISCLAIMER

This Guide is not a substitute for legal advice. Nor is it intended to be an exhaustive guide to all rules and regulations relating to promotions in the jurisdictions covered, or to cover all aspects of the legal regimes surveyed, such as specific sectoral requirements. Rather, it aims to simplify what are often complex provisions into a more manageable summary and to highlight areas of potential concern to promoters. It is current as at the last modified date stated in each section.

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CHILE

Last modified 04 April 2019

GOVERNING LAW What are the main applicable governing laws or codes for prize promotions?

Name Law or Code?

Chilean Civil Code Code

Chilean Criminal Code Code

Law 19,995, which establishes the general Law bases for the authorization, operation and control of casinos

Law 20,851, which regulates bingos, lotteries Law or other similar sweepstakes, with a beneficial or solidarity purpose

Law 18.568, which establishes standards of Law Lottery of Concepcion (Lotería)

Decree No. 152, of the Ministry of Finance, Decree setting the refunded, coordinated and systematized text of the Chilean Charity Polla organic law

Decree 1,298, which assigns to Polla the Decree administration of the system of sports forecasts (Sistema de Pronósticos Deportivos)

Law 4,566, of Hippodromes Law

Law N° 19.496, on the protection of rights of Law consumers rights Law 19,628, Data

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Protection Act

Law N° 19,628, on data protection Law

Note 1: Gambling is a regulated activity which is only lawful in situations expressly authorized by law. Games of chance are unlawful, unless authorized by special laws. There is no specific regulation regarding online gambling.

Note 2: The Ministry of Finance regulates through decrees the games of chance administered by Lotería and the Chilean Charity Polla. The supreme decree will establish terms and conditions applicable to the games with regards to the operation of them, the steps that Lotería should take to modify them and the conditions for participation by gamblers.

EXTRA-TERRITORIALITY Do national regulators enforce rules against entities operating abroad?

There are neither specific rules nor jurisprudence in regard to these matters. However, according to the Chilean Law on the protection of consumer rights, if the promotion targets Chilean consumers, but is promoted from outside Chile (for example a non-Chilean website or from outside Chile), the promoter must inform the consumers:

The terms and conditions for the promotion;

The amount or number of prizes; and

The period in which the prizes can be claimed.

Also the promoter should publish (as on the contest website) the results of the contests, competitions or raffles. The National Consumer Service (SERNAC) in turn requires that the terms and rules of contests or competitions must specify the following:

Description of the prize;

Number of prizes;

The way to participate in the contest;

How to collect the prize.

SERNAC and the Superintendence of Casinos (SCJ) do not have sanctioning powers, but they will do what they can to take action; however, this is limited and they are unlikely to prioritise such cases.

SKILLS COMPETITIONS

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Can a prize promotion be run that is based on skill?

Yes, since these kinds of competitions are lawful bets and games. However, it is important to take into account that the winner should be determined on the basis of ability and not chance, since in the latter case it would be considered gambling (which is only allowed in a limited manner as expressly authorized by law).

PRIZE DRAWS Can a prize promotion be run where there is an element of chance in the selection of the winner?

Yes, but only in the cases specifically allowed by law:

1. Draws authorized by Law Number 20,851, which regulates bingos, lotteries or other similar sweepstakes, with a charitable purpose.

2. Raffles authorized by the Law on the protection of consumer rights, that is sweepstakes used as a method to run a promotion, which imply an additional benefit for the user for the acquisition of a product or service by the consumer (sweepstakes for other purposes are illegal).

Any other draw in which there is an element of chance in the selection of the winner involved, would be considered and potentially deemed an illegal lottery or game of chance, which is defined in Law 19,995 of Casinos as 'those games whose results do not depend exclusively on the skill of the players, but essentially on chance or luck'. The direct exploitation of games of chance and development of games officially incorporated in the catalogue of games can only be done by authorised operators.

SELECTION OF WINNERS Are there any requirements for the selection of winners and award of prizes?

The terms of competitions and sweepstakes must indicate the terms for claiming prizes.

The names of the winners should be published (for example on the website of the promoter), and participants must be informed of the results of the contests, competitions or sweepstakes.

The right to collect the prizes will expire after 60 days from the date of the relevant sweepstake (Law 18.568, which establishes standards of the Lottery of Concepcion).

JUDGES Are there any particular requirements in relation to judges or judging for skills competitions?

Not applicable.

PRIZES Are there any restrictions on the prizes awarded?

No, but as indicated before, the terms of competitions and sweepstakes should indicate the terms for claiming the prizes and a description of the prizes.

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REGISTRATION REQUIREMENTS AND FEES Are there any registration requirements, or any fees/taxes payable?

In relation to competitions and draws authorized by the Law on the protection of consumer rights, although it is not mandatory, it is recommended to deposit before a notary a copy of the terms and conditions of the competition or lottery. In addition, participants should be informed that the terms and conditions were deposited before a notary and they must be made available to the contestants, which is usually achieved by publishing the terms and conditions on the contest’s web page.

The operators can only use the machines or implements previously approved and registered in a registry that carries the Superintendence of Casinos (as stated in the Law of Casinos).

In regard to taxes, the Chilean VAT Law stated the delivery or free of movable goods for promotional purposes is subject to Added Tax of 19%. The promoter should charge this tax.

OTHER LOCAL REQUIREMENTS Are there any other key local requirements?

The form of participation (including its conditions), the time or term of the competition or sweepstake, the amount of prizes and the method and the period to claim them must be indicated in the terms and conditions of the competition or sweepstake. Promoters should properly publish the results, including the winners, of competitions or sweepstakes.

Any gambling not explicitly regulated is illegal and only authorized operators can directly exploit games of chance and develop games officially incorporated in the catalogue of games (Law of Casinos).

The lottery system is reserved to Polla Chilena and Lottery of Concepción, except for those lotteries run for charitable purposes.

According to Law N° 19,628, that currently regulates data protection in Chile, if any personal data of the participants, and especially winners, is used for advertising, surveys, , product , promotional transactions or any other specific purpose, relevant wording must be included in the competition’s materials, so that the participants grant a prior written authorization for the use of said information (i.e. name, ID, images, age, etc).

TIMING Is time required to ensure compliance (other than reviewing the terms and conditions)?

No. However, time should be planned in order to deal with data protection compliance issues.

TRANSLATIONS Are the terms required to be translated by law?

Yes, terms and other documents of competitions should be translated into Spanish (Law on the protection of consumer rights).

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PENALTIES FOR NON-COMPLIANCE What are the penalties for non-compliance?

Criminal Code:

Art. 276: Authors, entrepreneurs, administrators, commissioners or agents of lotteries not legally authorized, will incur a fine of eleven to twenty monthly tax units (approx. US$750 to US$1,360) and will lose the movable objects placed in lottery.

If objects placed in lottery are real property, the penalty shall be a fine of twenty-one to thirty monthly tax units (approx. US$1,430 to US$2,040).

In cases of re-offending, imprisonment for a short period of time will also be applied.

Art. 277: Bankers, owners, administrators or gambling agents of luck, gambling or chance will be punished with imprisonment in any of its degrees and a fine of eleven to twenty monthly tax units (approx. US$750 to US$1,360)

Art. 278: Those who play at the referred places, will suffer the penalty of lesser imprisonment in their minimum degree or fine of eleven to twenty monthly tax units (approx. US$750 to US$1,360)

Art. 279: The money or effects put into gambling and the instruments, objects and tools destined for it will always be confiscated.

Law of Casinos:

Art. 51: Any person manipulating, modifying or altering the implements of the games or their development, to the detriment or benefit of the players or the operator, or substituting the material with which the game is played for the same purpose shall be sanctioned with a fine of 60 to 150 monthly tax units (approx. US$4,075 to US$10,200).

Law on protection of consumers rights:

Art. 24: Breach of this law will be sanctioned with a fine up to 50 monthly tax units (approx. US$3,400) In the case of repeat offences, the judge may, as much as, triple the original fine.

RESTRICTIVENESS OF REGULATIONS How restrictive are the legal obligations applicable to prize promotions?

Prize promotions are unlawful, except if they are explicitly permitted by law.

In this way, prize promotions related to lawful bets and games, such as prize promotions based on skill, sweepstakes and contests allowed by law of protection of consumer rights and games of chance for recreational purposes, will be allowed. Other types of mechanisms used for prize promotions will only be accepted provided that they are specifically accepted by law and under the condition they are operated by authorized operators.

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REGULARITY OF SANCTIONS How frequently does the regulator impose serious sanctions for non-compliance?

Fines and prison sentences indicated in the Criminal Code are seldom imposed.

In regard to sweepstakes and competitions permitted by the Law of Protection of Consumer Rights, if the promoter does not comply with their terms or the law, frequently the regulator imposes a fine. Also, if the promoter refuses to deliver a prize to a winning entrant, the entrant may forced fulfilling the promoter to comply with its obligation.

KEY CONTACTS

Matias Zegers Partner DLA Piper (Chile) [email protected] T: + 56 2 2798 2604

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Disclaimer

DLA Piper is a global law firm operating through various separate and distinct legal entities. Further details of these entities can be found at www.dlapiper.com.

This publication is intended as a general overview and discussion of the subjects dealt with, and does not create a lawyer-client relationship. It is not intended to be, and should not be used as, a substitute for taking legal advice in any specific situation. DLA Piper will accept no responsibility for any actions taken or not taken on the basis of this publication.

This may qualify as 'Lawyer Advertising' requiring notice in some jurisdictions. Prior results do not guarantee a similar outcome.

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