This article was first published in CCTA Magazine.

The problem that existed up till now was that under the Lotteries and Amusements Act 1976 it was unlawful to promote a lottery, where payment or other consideration was made in return for a chance of a prize. This led to such promotions often being accompanied by a "no purchase necessary" route.

On 1st September 2007 the Gambling Act 2005 (the Act) became the main statute governing lotteries and prize promotions in Great Britain.

The Act splits lotteries into 2 separate categories, "simple" and "complex".

An arrangement is a simple lottery if:

  • persons are required to pay in order to participate in the arrangement,
  • in the course of the arrangement one or more prizes are allocated to one or more members of a class, and
  • the prizes are allocated by a process which relies wholly on chance.

A complex lottery is similar but:

  • the prizes are allocated by a series of processes, and
  • the first of those processes relies wholly on chance.

The promotion of a lottery generally remains unlawful unless licensed.  It follows however that if people do not need to pay to participate then the arrangement is not a lottery and the Gambling Commission (Commission) will have no regulatory responsibilities.

Payment includes not only paying money or money's worth but also paying for goods or services at a price or rate which reflects the opportunity to participate in the arrangement. Therefore, product promotions with prize draws where the price of the goods or services does not include any element of payment to participate, beyond the cost of the product, are not lotteries.

Care must be taken so as not to render a prize promotion unlawful by, for example:

  • requiring the customer to call a premium line to claim any prize said to have been won,
  • though not increasing the price of a product, reducing its quality or composition during the period of the promotion
  • changing the price of a "standard" product to compensate for the chance to enter shortly before the period of the promotion.

Payment does not include incurring expense, at a normal rate, of sending a letter 1st or 2nd class, making a telephone call or any other method of communication, such as text.

It is irrelevant to whom the payment might be made or who benefits from the payment. If the creditor makes no charge for entry but say the telecommunications company does (other than at a normal rate) then payment will still be made.

It is possible to give customers the choice of participating by paying or by sending a communication and still avoid classification as a lottery. To do so the promoter must ensure:

  • the communication mentioned is either a letter sent by ordinary post or some other method which is neither more expensive nor less convenient than entering by the paid route,
  • the choice is publicised in such a way as to be likely to come to the attention of each individual who wishes to participate, and
  • the system for allocating prizes does not differentiate those who participate by paying and those who participate by sending a communication. The Commission, though having no regulatory responsibilities in respect of product promotions with prizes and draws will still monitor the boundaries between them and lotteries. Where the Commission believes that a product promotion with prizes or a draw is in fact an unlicensed lottery and unlawful then it will have the power to investigate and, if it considers necessary, prosecute.

In summary, in mainland Britain (the Act does not apply to Northern Ireland), to offer a prize promotion, provided participants can enter by paying no more than the normal price for a product or service advertised then there will be no requirement to offer a "no purchase necessary" entry route. If there is a payment made to enter then a "no purchase necessary" route must still be made available to avoid classification as a lottery and the choice of entry methods publicised in such a way as to be likely to come to the attention of each individual who proposes to participate.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.