As result of a recent amendment to the Czech Act on Lotteries, some consumer competitions and contests, which in the past had not been specifically regulated under Czech law, could now be considered as games of chance, subject to regulation and licensing requirements of the Act on Lotteries. This new amendment becomes effective on September 1, 1998.

The new definition of a consumer contest that would be subject to the provisions of the Act on Lotteries is as follows:

"A lottery or a similar game is considered to be one of the following events: contests, consumer promotion surveys and other prize-winning competitions, in which the organiser undertakes to pay or give free financial awards, saving accounts, securities, insurance policies, real estate and/or merchandise prizes to contestants selected by drawing or other random-based method, with the participation in thereof being preconditioned by purchasing a certain product and proving it to the organiser, entering into a contract with thereof even though indirectly through another person, or preconditioned by any other situation that leads to purchasing a certain product (to be further referred to as "consumer contests"). Performing of consumer contests with their outcome being based on chance is prohibited without having a consent of a permission-granting body."

The amendment, in its most controversial provision, also specifies that permission for operating a lottery or other similar game (including a consumer contest falling under the definition specified in the amendment) may only be issued to a legal entity having its seat on the territory of the Czech Republic. Furthermore, the permission may not be issued to a Czech legal entity having foreign capital participation, i.e., wholly or partially owned by a foreign person or company. It is generally accepted that this part of the law is in conflict with numerous bilateral agreements on protection of investments of which the Czech Republic is a signatory.

As a result of the amendment, consumer competitions and contests in the Czech Republic must now be divided into the following classes:

a) Competitions subject to license, e.g., those competitions where the outcome is determined using a random based method, with participation therein being preconditioned by a product purchase or preconditioned by any other situation that leads to purchasing a certain product.

b) Competitions not subject to license, e.g., those competitions where the outcome is not determined using a random based method, with participation therein not being preconditioned by a product purchase and not preconditioned by any other situation that leads to purchasing a certain product.

c) Competitions which may or may not be subject to license, depending on the interpretation of the law by the authorities, e.g., those competitions where the outcome is not determined using a random based method, with participation therein being preconditioned by a product purchase, or preconditioned by any other situation that leads to purchasing a certain product.

The Czech Ministry of Finance is responsible for granting the necessary permissions for operating regulated consumer competitions. The amended Act on Lotteries specifies financial penalties of up to CZK 500.000 for operation of a regulated lottery or a similar game without a permit.

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