Competitions, Prize Draws & The Gambling Act 2005

April 11th, 2007

In September 2007, the Gambling Act 2005 which comprehensively updates existing gambling laws that are several decades old will be implemented. According to the Department for Culture Media and Sport the act has three main aims (1) Keeping gambling crime free (2) Making sure that gambling is fair and open and (3) Protecting children and vulnerable adults. On the surface the act is mainly about gaming and gambling, but will there be any changes that effects competitions and prize draws?

According to the Gambling Commission “Prize competitions and free draws are, and will remain under the 2005 Gambling Act, free of statutory regulatory control” but the new law aims to clarify the “distinction between lotteries, prize competitions and free draws”.

Finding information to help compers regarding changes that may effect them isn’t straightforward via the Government sites, but have put together some useful details regarding purchase necessary prize draws: According to these kind of prize draws “will become lawful provided participants are not asked to pay for goods or services at a price or rate which reflects the opportunity to participate”.

You can read the Gambling Act 2005 in full, but we’ve had a look through for more competition related issues. Payment to enter is described in Section 19, Schedule 1 of the act and the good news is that standard rate telephone call and ordinary post is not to be regarded as payment for entry, however premium rate phone lines (for example) are regarded as “payment to participate” and therefore a free entry route should be offered for this kind of competition.

Section 14 of the act though, according to Harbottle & Lewis, is a grey area and it covers the issue of skill. According to the act the skill level of a competition, in order to distinguish it from a lottery should be set so as to prevent a significant proportion of people who wish to participate from doing so or a significant proportion of people who participate from receiving a prize. Harbottle & Lewis say that this section has “been overlooked” – whether that means ignored or will be ignored is anyone’s guess?

To demonstrate the complexity of how this law looks there’s an excellent Q&A document at Marketing Law which goes into detail about how prize draws and competitions will operate from September 2007. This is an ideal document for anyone thinking of running a prize draw promotion and is unsure about the changes. You can download the report as a word document and this provides a useful flow chart to help you find out if your competition will be legal or illegal.

In summary, from September the “No Purchase Necessary” option seems to be simply moving from the traditional shopping based prize promotions to the newer premium rate phone line and text messaging competitions. If they are to continue they will need to offer a free entry route (e.g. via the web) or be run at standard rates.

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