No more giving gifts with a pack of cigarettes. Aren’t you engaging in prohibited practices?

Have you noticed this novelty? Just a few months after the prohibition of the sale of heated tobacco, there has been further regulation. The legislative change,[1] which was adopted quietly late last year during the House of Deputies' consideration of the consolidation package, affects all tobacco and related products, and restricts certain practices in their sale and promotion. So, what should sellers look out for, and which practices should be avoided?

Due to their negative impact on human health, the sale of tobacco and related products, i.e. smoking aids, herbal products for smoking, electronic cigarettes (including refill containers) and tobacco free nicotine pouches ("smoking products"), is subject to specific regulation. For example, these smoking products can only be sold in certain types of shops and establishments, cannot be offered to persons under 18, and special rules also apply to their advertising.

The following restrictions were introduced with effect from 1 January 2024:

1. the prohibition of the offering and provision of any economic advantages in connection with the sale of smoking products (the "prohibition of economic advantages");
2. the prohibition of the provision of smoking products free of charge or in the form of another advantage in connection with the sale of other goods or services (the “prohibition of free provision”); and
3. the prohibition of suggesting any advantages in connection with the sale of smoking products.

What does this mean in practice?

The new restrictions affect a significant number of promotions and other practices used by sellers of smoking products in their business activities.

Therefore, it is no longer possible to offer customers a free gift (e.g. alcohol or car fragrances) when selling smoking products, to provide free refill containers for the purchase of electronic cigarettes or to favour the purchase of a higher number of goods in a promotion (e.g., 3 + 1 free pack promotion). 

However, there are a few other activities for which the legislation does not specify whether they are subject to the new prohibitions (e.g., loyalty programmes, organising consumer contests or providing rewards for registration or completing surveys).

The assessment of whether a specific case constitutes a prohibited practice will always depend on the interpretation by the Czech Trade Inspection Authority. However, it can be expected that, given the meaning and purpose of the Act, as well as the relatively broad wording of the prohibitions in question, the inspection authority will classify such promotions under the prohibitions and tend to sanction them.

In addition to the actual offering and provision of advantages in connection with the sale of smoking products,[2] the promotion of such events is also prohibited.

Are there any exemptions?

The following rules apply to the new restrictions:

1. While the prohibition of economic advantages applies only to the sale of smoking products in brick-and-mortar shops and does not apply to on-line sale, the prohibition of free provision always applies, regardless of the place and method of sale.
2. This also leads to the conclusion that the prohibition of economic advantages does not apply to the sale by mail order, either. That is, when the sale takes place in the on-line space and the shop serves only as a certain point for dispensing consignments. Such a conclusion is supported by the case law of the Supreme Administrative Court,[3] which can be applied by analogy to the assessment of a specific case. 
3. The prohibition of economic advantages is limited only to the sale of smoking products to consumers (B2C). In contrast, the Act does not impose any limitation on the prohibition of free provision, and it is therefore questionable whether it also applies to the sale by a business to another business (B2B). We assume, however, that the legislature did not intend to inspect the business terms between businesses for any of the prohibited practices.
4. Neither the prohibition of economic advantages nor the prohibition of free provision should affect the long-term sale of smoking products at lower prices, the discounted sale of larger packaging or lower prices for on-line sales compared to sales in brick-and-mortar shops. Provided, of course, that the seller complies with other rules, including price record-keeping and competition obligations.

Penalties: who faces them and in what amount?

In case of violation of the prohibition of economic advantages and the prohibition of free provision, sellers may be fined up to CZK 1 million and individuals up to CZK 150,000. 

Violation of the prohibition of promotion of events consisting in offering and providing economic advantages in connection with the sale of tobacco products may be fined up to CZK 2 million. That fine can be imposed on the person who commissions the advertisement (usually the seller) and the person who processes it (usually the advertising agency), regardless of whether or not the person is a business.