Giving a special gift with a purchase has become one of the favorite marketing tools used by enterprises. Besides, it is also one of the most familiar activities of consumers. The motivation provided by business gifts not only in regard ωin-house sales forces, but also other competitors' strategies, can have a significant impact on the achievement of sales goals. Past studies focused almost entirely on the issues of advertising or coupons, and therefore studies on gift promotion are relatively few. Since the value of business gifts offered by enterprises as marketing strategies is very important, a formal study on business gifts from the point of view of the economic welfare aspect is deemed necessary. By contrast, the basis for a business gift is not merely the prices or quality of the firm’s products, but is rather some other benefit to the consumer, including a specific reward. According to different fair trade laws (FTLs) around the world, it is provided that “no enterprise shall have any of the following acts which are likely to lessen competition or to impede fair competition.” Thus enterprises that conduct promotional campaigns such as gifts-with-purchase might be in violation of the FTL. To facilitate the effective handling of cases involving suspected unfair competition under the FTL, the competition authorities in countries such as Japan, Korea and Taiwan have formulated guidelines on the handling of business gifts. However, while guaranteeing government intervention in this promotional activity would be better for competition or for social welfare, more in-depth theoretical economic analysis has yet to be performed. The main purpose of this article is to provide an economic framework to discuss the regulatory effect of business gifts based on social welfare criteria. Although the gift actions of the individual firms in an industry are affected by the gift actions of the other firms under the duopolistic situation, based on the conjectural variation approach, whether or not the equi1ibrium condition and social welfare are affected by the market’s structure or competitors’ strategies is examined. Furthermore, some implications could be concluded for welfare measurement under government regulations regarding business gifts.