Sales Promotions
by David Wolberg, Kuperschmit, Goldstein & Co.
General Remarks
Though, generally, sale promotions are legal in Israel, there are many qualifications and restrictions. Sale Promotions in Israel are governed by a combination of laws, regulations and court rulings.
The dominant law in this field is the Consumer Protection Law – 1981 (“CPL”) and its derived regulations. The CPL provides extensive disclosure obligations. In addition, there are many obligations and restrictions designed to prevent misleading and confusing consumers, which unfortunately, is often the case with sale promotions.
Very often sale promotions are targeted at minors. The Consumer Protection Regulations (Advertisements and Marketing Methods Targeted at Minors) – 1991, prescribes strict rules relating to misleading minors, inclusive by means of sale promotions.
Though the CPL and its derived regulations generally apply to all sale promotions, irrespective of the promotional methods or media, it should be noted that sale promotions through advertising on television are strictly regulated and require pre broadcasting clearance/authorization by the relevant bodies. The Second Television and Radio Authority Rules (Television Advertising Ethics) – 1994 and the Communication Rules (Bezek and Broadcasting) (Advertisements, Services and Sponsorship Broadcasting on designated Channels) – 2004, set specific rules and guidelines relating to sale promotions via television advertisements. The former Rules relate to private television stations (in contrast to state/national television) and the latter Rules relate to private television broadcasted through cable and satellite.
Discounts
Discounts are permitted under Israeli law, subject to qualifications. First and foremost, discounts must actually be a reduction in price, not merely a deception designed to allure consumers. Discounts may not be misleading in breach of the CPL. In addition to the CPL’s general provision which outlaws misleading consumers, Section 2(12) of the CPL prohibits miss representing the ordinary/customary price of goods or the price demanded in the past. Therefore, as an example, the following display on merchandise: “was NIS100, now NIS50”, must be accurate and truthful.
Free Gifts and Premiums
Free gifts and premiums are generally permissible provided they adhere to CPL’s disclosure obligations and do not mislead or confuse consumers.
The Second Television and Radio Authority Rules (Television Advertising Ethics) – 1994, prohibit offering “free” gifts, unless they are completely free, excluding the postal fee. Goods or services offered in exchange for the purchase of additional goods and services, must be clearly described as such and cannot be described as “free gifts”.
Promotional Contests/Games
The Israel Penal Law – 1977, subject to qualifications, outlaws unauthorized games, gambling and draws. Assuming the promotional contests/games are not regarded as unauthorized games, draws or gambling, they will be permissible under Israeli law.
An unauthorized game is defined as a “game in which one may win money, its equivalent or a benefit due to the results of a game, and the results are more dependant on luck than on understanding or capability”. Therefore, a promotional game which is more dependant on skill than on luck will be legal. There are no clearly defined “skill thresholds”. However, there is clearly a requirement for an element of skill which should outweigh the element of luck. As an example, the organization of backgammon games, which requires both elements of skill and luck, in certain contexts was held illegal. The Tel Aviv District Court ruled that a Bingo/Trivia Pursuit game, in which a bingo winner must answer three (3) simple trivia questions in order to claim a prize, constitutes an “unauthorized game”.
Gambling is defined as “any arrangement whereby one can win money, its equivalent or a benefit, and the winning is dependant on guessing, inclusive of a lottery connected to the results of games and sporting events”.
A draw is defined as “any arrangement whereby the draw of fate or other means, one can win money, its equivalent or a benefit, and the winning is more dependant on fate than on understanding or capability”.
Pursuant to the Penal Law, the Minister of Finance is empowered to authorize certain types of sweepstakes/draws. In accordance to these powers, he permitted certain types of draws, via an “Announcement of a General License to Conduct Draws for Commercial Advertising/Promotion” (“General License”). Since a General License has been granted to promotional draws, promoters need not apply for licenses prior to conducting draws. Nor is there a need to register a draw.
Nevertheless, pursuant to the General License, there are many formalities, technicalities and restrictions which must be obeyed, such as the requirement to notify the Ministry of Finance’s General Manager (“MOFGM”) of the draw and its framework. Additionally, the draw’s organizer(s) must appoint an Inspector (either an attorney or accountant) who is responsible for the Draw’s administration (“Inspector”). The Inspector must notify the MOFGM that he/she has been appointed as the draw’s Inspector and submit an official report relating to the draw. Additionally, there are requirements relating to the publication of the draws winners, the execution of the actual draw, etc.
Very often promoters will target games, contests and sweepstakes at minors. Thus it is worth mentioning that under Israeli law, contracts with minors (being under 18 years of age) may not always be upheld, and under certain conditions may be cancelled by the minor’s representative. A representative is usually a parent. Nevertheless, legal actions (such as entering a contract), may be binding if they are customary to minors of that age. In any event, it is recommended that contest promoters seek parental/guardian consent in the event of a minor entrant.
Special Sale
Pursuant to the CPL, if a merchant offers goods and/or services within a “special sale”, i.e., an “end of season sale”, a “special event sale”, a “holiday sale” a sale designed to clear out old stock, a “limited time” sale, etc., the merchant must disclose/clarify precisely what goods and/or services are being offered, the price before the sale, the discount percentage and all additional applicable terms. If the discounted goods are faulted, of low quality or nearing the expiration date, the merchant must specifically mention the reason for the discount. Discounted goods being offered within a “special sale” must be separated from the goods which are not included in the “special sale”.
Sale Promotions of Pharmaceuticals
Naturally, due to the nature of pharmaceuticals, their marketing and promotion is subject to stringent primary laws and regulations. Moreover, the promotion of prescription only medicines differs from the promotion of non-prescription medicines.
The laws and regulations relating to the sale and promotion of non-prescription medicines are lenient in comparison to the sale and promotion of prescription medicines. Though one may advertise non-prescription medicines, they cannot be targeted at children, distributed within sweepstakes, as free samples, or distributed within a promotion of non medicinal products.
Pursuant to the Ministry of Health’s Procedure No. 24, it is prohibited to advertise, in any manner, prescription medicines. In exceptional circumstances in which it is important to disseminate explanatory information relating to prescription medicines, the Ministry of Health may authorize such dissemination, which may be provided personally by the doctor to the patient. Such material may not be distributed in pharmacies, clinics, doctors’ waiting rooms, etc.
Tobacco and Alcohol
The laws and regulations relating to the promotion, sale and advertising of tobacco and alcohol are quite stringent and detailed.
Pursuant to the Limitation of Tobacco Advertisement Act – 1983, it is prohibited to market tobacco products with accompanying free prizes, gifts or the right to participate in a sweepstake or competition. Furthermore, one may not distribute tobacco without consideration. Tobacco product packages must include a warning sticker which states: “warning – the Ministry of Health determines that smoking causes serious diseases”.
The Consumer Protection Regulations (Advertisements and Marketing Methods Targeted at Minors) – 1991 prohibit advertisements and marketing methods which encourage minors to consume alcoholic beverages and the use of cigarettes or other tobacco products.
The Second Television and Radio Authority Rules (Television Advertising Ethics) – 1994
Prohibit the advertising of tobacco products on private television. Though the same Rules do not prohibit advertising alcoholic beverages, they prohibit broadcasting advertisements that portray the consumption of alcohol as beneficial to the quality of life, health, success, mental or physical capabilities or sexual performance.
New “Spam” Law
Unfortunately, spam, unwanted marketing messages, inclusive of sale promotions, has become very common in Israel. Fortunately, a new law has entered fore in December 1, 2008 which will hopefully decrease the amount of spam circulated in Israel.
The law applies to messages sent via electronic means, such as email, fax machines, automatic dialing systems and short written messages, such as SMS messages. The law is quite complex and technical. In short, subject to qualifications, Israel has adopted the “opt in” model whereby a message sender must receive clear consent from a recipient before sending a message. Consent must be given in writing, inclusive of an electronic message, or within a recorded conversation. A recipient who consented to the receipt of messages, maintains the right to withdraw his consent at any given moment.
All messages in accordance the above law, must clearly depict the word “Advertisement” at the beginning of the message, the advertiser’s identity and address and the option of declining further messages.
Since the new “Spam Law” has taken affect recently, it is difficult to determine whether it will decrease the amount of spam currently circulating among the Israeli public. Nevertheless, according to recent reports, 35% of Israelis believe the amount of spam has decreased since the law entered force.
