Prize Competitions And Free Prize Draws – New Guidance

In July 2007 we provided an update on the Gambling Commission’s ("GC") consultation and guidance on the law relating to prize competitions and free prize draws in the light of the provisions in the Gambling Act 2005 (click here to view previous article).  Essentially, to avoid an illegal lottery, either there must be no payment by participants to enter or there must be a sufficient degree of skill required. In the GC’s guidance, it noted that two issues in particular needed further consideration:

• whether web entry would always be classed as a free entry route, particularly where the need for an immediate response is emphasised or the scheme is run for only relatively short periods; and
• guidance on the level of skill required for a ‘prize competition’.

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In July 2007 we provided an update on the Gambling Commission’s ("GC") consultation and guidance on the law relating to prize competitions and free prize draws in the light of the provisions in the Gambling Act 2005 (click here to view previous article).  Essentially, to avoid an illegal lottery, either there must be no payment by participants to enter or there must be a sufficient degree of skill required.  In the GC guidance, the GC noted that two issues in particular needed further consideration:

• whether web entry would always be classed as a free entry route, particularly where the need for an immediate response is emphasised or the scheme is run for only relatively short periods; and
• guidance on the level of skill required for a ‘prize competition’.

As a result, the GC has now provided further guidance in relation to free prize draws and prize competitions as follows.

The GC has acknowledged that:

• in certain circumstances, free web entry will be a satisfactory alternative to the paid route to allow a scheme to qualify as a free prize draw;
• free web entry has clear attractions for most participants who use it due to it genuinely costing them nothing. This contrasts with the traditionally accepted postal route which costs the participants money to use; and
• home web access may well meet the statutory test on its own in the future.

The GC has set out helpful guidelines which should assist promoters in concluding whether or not a web entry for a specific prize draw will qualify as a free entry method:

1. Potential participants who do not have home web access need sufficient time to gain web access elsewhere.  The GC has specified that it considers three working days as a reasonable length of time to obtain such access.  This will effectively make TV prize draw shows that are only aired for a short period of time illegal lotteries, unless they offer an alternative free entry route e.g. a standard rate telephone call, or they alter their format to include an acceptable level of skill such that they fall within a prize competition.
2. Participation by web access should be available at all times while the promotion is being actively promoted.  Therefore, a quiz on a television programme should permit web entries while the programme is being aired. Clearly, on the basis of point 1 above, this will only apply to prize draws when they are being promoted by a television programme which is aired over a three-day period or longer.
3. The availability of free entry via web access should be made widely known.

The GC guidance is keen to point out that, where doubts remain whether the free web entry route will be acceptable or not, an accepted free entry route should also be used i.e. post.

To the extent that promoters have not already had to change the format of prize draws following the recent inquiries into fraudulent practices, this new guidance on web entry will significantly impact TV prize draws that are aired for short periods of time, where the first stage of the draw involves a random selection of entries to decide who can participate in the draw.  Promoters will not in this instance be able to use web entry as a free entry route in order to fall outside an illegal lottery.  Promoters will have to offer alternative, less attractive (to the promoter) free entry options, such as standard rate telephone calls.  Alternatively, promoters could change the structure of the draw to include a requisite level of skill at the first stage so that it falls into the category of a prize competition.

The test for a scheme to qualify as a prize competition under the 2005 Act is whether the skill, knowledge or judgment element can reasonably be expected to either a) prevent a significant proportion of people who wish to participate from doing so; or b) prevent a signification proportion of people who participate from receiving a prize.

It is accepted that the first of these limbs may be difficult for the promoter to establish.  The GC has attempted to set out some ground rules which could be taken as indicating that the skill, knowledge or judgement element was satisfactory.  If such is established, the GC has indicated that it would not pursue the matter further.

The guidance concentrates on competitions which use multiple answers.  It has stated that in these types of competitions, the GC will not generally take action where a) there are sufficient plausible alternative answers, b) the question is relevant to the context in which the competition is offered, c) the correct answer is not provided close to the question (e.g. this would capture the situation where the answer is made obvious in the text of an article above the question) and d) ‘joke’ answers are avoided.

The GC has stated that where other types of format are used, they would require an equivalent level of skill, knowledge or judgment.

The guidance also confirms the GC’s intention to adopt a collaborative approach to potentially wrongdoers, at least initially, by encouraging dialogue with promoters who will be invited to explain their actions and demonstrate that they have acted reasonably.  The GC hopes then to resolve differences of opinion without the need to prosecute.   

The full text of the guidance can be found here.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

The original publication date for this article was 15/11/2007.