The prize draws and competitions (PDC) industry has grown rapidly in the UK in recent years. The market is smaller than the National Lottery but still significant. It is estimated that around 7.4 million adults (14% of the adult population) have participated in PDC's in the last year (as of November 2023), spending an estimated total of £1.3 billion.
Some PDC's are linked to charitable donations. Others seem to be business models in their own right. For example, several vintage car dealers regularly run PDC's on Instagram for the chance to win a vintage car. You can currently enter one competition which costs £18 per ticket, with the number of tickets being capped at 3,500. But in order for the event to qualify as a competition, rather than a lottery that would require a license, the promoters also ask you to answer their skill-based question. So let's test your skill and judgment, and see if you can answer the actual brain-teaser being posed:
"What would you typically do with a car?
- Eat it.
- Read it.
- Drive it."
Tough one, eh! Perhaps not quite up to the standards of The Times cryptic crossword, or even The Telegraph quick crossword. But does it meet the legal requirement that the question must either prevent a significant proportion of would-be participants from taking part, or prevent a significant proportion of participants from moving to the second stage of potential winners from which the final winner is selected? That's anybody's guess, but probably not.
It's important to remember that this is not a conventional prize draw, whereby many brands will offer purchasers a chance to win a prize when they buy one of their products. The Gambling Act 2005 changed the law for these prize competitions, and provided the price of the relevant product is not increased above its normal selling price, there is no payment to enter, so the Act does not apply. In this case, however, the only thing being purchased is the entry into the competition.
So PDC operators also routinely offer an alternative free entry by post, which must be "genuine, realistic and unlimited" to remain beyond the remit of the Gambling Act 2005. Historically, some operators risked failing this test by burying any mention of the free entry route deep in their terms and conditions. To be fair to the promoter of this vintage car promotion, they make a reasonably prominent reference to the postal entry route, although arguably they do so slightly too late in the customer journey, and not in the first ads that appear on your Instagram feed.
Even if the PDC can escape the clutches of the Gambling Act, they are regulated by the CAP Code and the Advertising Standards Authority (ASA) will take action if the rules are broken. Some PDC operators have improved the way that they advertise the existence of the alternative free entry route, sometimes as a result of interventions by the ASA. But as PDC's are not subject to gambling regulatory oversight by the Gambling Commission, they may lack protection for players, and are not obliged to follow the rules on identifying and mitigating gambling-related harms.
The government has recently published research which considered the following questions:
- What is the size and scale of the prize draws and competitions market (both demand and supply)?
- What evidence is there of negative consequences from these products?
- If any harm is identified, what would be the most effective and proportionate intervention?
The research identified the following potential harms: transparency and player protection, gambling harm, consumer harm, impact on the lottery industry and then considered various methods of addressing those harms.
- Compliance with the advertising codes and consumer protection law is mixed, especially regarding transparency about how likely you are to win, how winners are chosen, the rules of the promotion and whether free entry routes are available. Complaints to the ASA are typically about free entry routes, scams or the fact that the prize was changed or not awarded on time (or at all).
- 75% of consumers reported seeing age restrictions, but most operators rely on self-certification of age.
- Just over one tenth of PDC players gamble with negative consequences, compared to just 3% of the general population and 5% of all gamblers. Few operators' websites link to gambling charity websites, offer self-exclusion mechanisms or remind users to play responsibly.
- Lottery operators find it hard to compete because they have to comply with additional rules. These include limits on restrictions on prize size, ticket sales (for society lotteries) and advertising, as well as obligations to make minimum charitable contributions and identify and mitigate gambling-related harms.
The research says that any potential intervention into this market should be proportionate and acknowledge the fact that consumers clearly derive some enjoyment and satisfaction from participating in PDCs and that there is no direct evidence of a causal relationship between PDC participation and harmful gambling.
Changes to gambling regulation
The research says that an option to improve regulation might be to bring PDC's under the oversight of the Gambling Commission, which could mean requiring a licence to operate.
They may also separately be made subject to limits on the size of their prizes and ticket sales in the same way as society lotteries or required to pay gambling duty or donate a minimum proportion of their proceeds to charity.
This would require primary legislation, which means it would take a significant amount of time to implement. It would impose a significant amount of extra cost.
Greater enforcement of consumer protection rules
An alternative intervention option would be to pursue more assertive enforcement of existing consumer protection rules. The ASA has previously taken action against potentially harmful advertising by PDC operators, for example, regarding the free entry route or retrospective changing of prizes, so there is precedent that this intervention would reduce the prevalence of harmful practices by operators. This intervention might also increase the level of transparency in the market. Again, this might add extra costs.
Voluntary code of conduct
The report also considers voluntary codes such as that for "loot boxes". A code could reduce the prevalence of harmful conduct by operators and increase transparency. However, the report's authors highlight that a voluntary code might have poor take-up and/or adherence. It could be more challenging to implement such an intervention in the PDC sector than it was for loot boxes because of the large number of operators and the lack of an established industry body. If a voluntary regulation route were to be chosen, it's not clear why it would not best be left to the ASA.
Next steps
The report concludes that the most proportionate response may be to begin with a light-touch approach (e.g. a voluntary code of conduct), with the option to amend gambling regulations if such a code proves problematic to develop or take up and adherence to the code is inadequate.
And finally, for your chance to win the trip of a lifetime in a Spitfire, just send us a tenner and let us know whether that iconic aircraft was manufactured by Junkers, Messerschmitt or Supermarine? Is this (a) a proposition by Wittgenstein, or (b) a statement of the bleedin' obvious?
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