The ASA said it "considered the original limitation of the random swaps mechanism to only type 2 letters was a significant condition likely to influence a consumers' decision" and the omission was "misleading and likely to cause unnecessary disappointment to consumers".
It told Walkers that in similar future promotions, it must ensure "significant conditions for all aspects of the promotion were communicated to consumers".
A Walkers spokeswoman said: "We welcome the ASA's recognition that our Spell and Go promotion was fair as everyone who participated had an equal chance of winning one of the 20,000 holidays available.
"We appreciate that the online letter swapping mechanic could have been clearer and we will ensure all future promotions take this feedback on board."
She added: "Our Spell and Go promotion has been very popular and we've given 796 families four-star, seven-night holidays worth over £1.35 million.
"We're aware some customers are disappointed that they haven't been successful in winning a holiday. 20,000 holidays could have been won if all the promotional packs in the market had been played and we would have honoured all of those should that have been the case."