The £5,000 gamble when running promotions

Unless your raffle/prize draw is either free to enter (or requires payment, but with a free entry route) or constitutes a ‘skill competition’, it will be a lottery.

And any individual or company involved in promoting a competition which is a lottery or managing an illegal lottery is guilty of a criminal offence under the 2005 Gambling Act. If found guilty, you could be liable to a fine of up to £5,000 and/or imprisonment for up to 51 weeks (England and Wales) or six months (Scotland).

Skill competitions and free prize draws remain outside the Gambling Act, so it is important to structure such promotions to make sure that they do not inadvertently fall within the definition of a lottery, betting or gaming.

So what practical steps can you take to achieve this?

– The Gambling Act 2005 says that paying the usual price for something does not amount to payment to participate in a competition (which used to be the case). So a competition is not betting, provided the product featured in the promotion is sold at its normal price. Collate information to confirm this.

– Check that the skill element of a competition will either deter entry or eliminate a significant proportion of entrants. If you don’t think it will, you need to increase the skill aspect. Again, collect information to supports this.

– If the competition does not satisfy the skill requirement, make sure that no payment is required to participate. And this means payment to enter, find out who has won or to collect a prize.

– If you can’t do this there needs to be a well publicised free entry route which must be convenient and not discriminate. Posting a letter (first or second class, without special delivery arrangements), or making a standard charge telephone call is OK. However, a call or a text message to a premium rate telephone number isn’t.

– If the competition involves forecasting, participation should not require payment.

– Use the British Code of Advertising, Sale Promotion and Direct Marketing, the CAP Code, which sets out basic rules to be followed when running promotions. Broadcast commercials are subject to the BCAP TV or Radio Advertising Standards Code.

To summarise, if your competition does not satisfy the skill requirement and involves payment (without a free entry alternative), you should stop running it.

This article is not meant to be a detailed analysis of what is and isn’t legal, but to demonstrate that running a competition or prize draw is a potential minefield.

If you wish to run this type of promotion, get specialist advice. Then make sure it is signed off by a lawyer specialising in promotional law.

Good luck!

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