Games often take the form of prize competitions or draws. Both carry the risk of being caught by the Gambling Act 2005 (Act) commonly as a lottery. Therefore, it is important to structure them so that they do not fall within the definition of a “lottery” – these are illegal under the Act unless the organiser has an operating licence or falls into one of the (very limited) exemptions.
A prize contest will not be deemed a lottery if it satisfies the “skill” requirement (see below) or if there is no payment requirement to enter.
Under the Act, the “skill” requirement is satisfied if the prize contest contains a requirement to exercise skill or judgment or to display knowledge and where it can reasonably be expected that the requirement:
- prevents either a significant proportion of potential participants from entering; or
- prevents a significant proportion of entrants from receiving a prize.
If questions are too simple to deter a significant proportion of potential participants, or to eliminate a significant proportion of entrants, they will fail the “skill” requirement. The Gambling Commission (the regulator for the gambling industry) has given the following advice:
“The more questions or clues that have to be solved, or the more obscure or specialist the subject, the more likely it is that application of the statutory test leads to the conclusion that the competition is not a lottery.”
A question such as “In what country would you find London?” would almost certainly be deemed too simple. The Gambling Commission has not, however, issued guidance on what would be deemed a “significant proportion”, apart from that the expression should be given “its ordinary, natural meaning”.
Free to enter
If a prize contest does not meet the “skill” requirement, it will be a lottery unless:
- no payment is required to enter (whether this is to participate in the competition, or to establish you have won, or to collect a prize); or
- there is an alternative free method of entry.
The Act states that “payment” includes paying money or paying more for something to reflect the opportunity to enter the prize contest. Therefore, if promotional and non-promotional packs of a product (say a boxed video game) cost the same, there will be no payment.
Even if there is a paid route to enter, a competition will be treated as free to enter if there is an alternative free entry method, provided that:
- the alternative method is a letter sent by ordinary post or some other form of communication which is neither more expensive nor less convenient than the paid-for method;
- the choice is publicised in such a way as to be likely to come to the attention of all those who propose to participate; and
- the system used to allocate prizes does not differ between the two entry routes.
Consequences of running an illegal lottery
An individual or business involved in promoting or facilitating an illegal lottery (which includes a contest which is, in fact, a lottery) is guilty of a criminal offence under Part 11 of the Act, and, on conviction, is liable to a fine of up to £5,000 and/or imprisonment for up to 51 weeks (England and Wales) or six months (Scotland). These sanctions are, of course, a worst-case scenario, but the bad publicity that could result from running a contest which is deemed to be an illegal lottery could be substantial.
CAP Code on prize contests
All prize contests must comply with the requirement of the UK Code of Non-broadcast Advertising, Sales Promotion and Direct Marketing (CAP Code). It sets out certain additional rules. The CAP Code applies to all marketing communications in print, cinema and video, as well as online advertising in paid-for space. It does not apply to broadcast commercials which are subject to the UK Code of Broadcast Advertising or Radio Advertising Standards Code, or to the content of premium rate telephone services which is regulated by PhonepayPlus.
As well as the general principles that require advertisements to be legal, decent, honest and truthful, the CAP Code requires certain information to be given to consumers before or at the time of entry into the prize contest.