“To avoid any misunderstandings”, the Gambling Commission has published an advice note on prize competitions and free draws: house competitions. The point of the note appears to be to impress upon anyone thinking of running a competition to win their house that the Commission “does not, in any circumstances, approve house competitions” and that, more often than not, organisers of such competitions will “attract regulatory intervention from the Commission”.
In October 2008, the Commission issued a press release headed “Homeowners urged to be aware of rules on house competitions”. This explained that growing numbers of homeowners were resorting to running prize competitions as a method of realising the value of their homes. The press release warned homeowners that attempts to sell homes using prize competition schemes could potentially fall foul of the Gambling Act 2005.
Prize competitions are exempt from statutory control under the Act provided they require sufficient skill, judgment or knowledge to either deter a significant proportion of potential entrants from participating or eliminate a significant proportion that do enter. Schemes that do not meet the test of skill, judgment or knowledge set out in Section 14(5) of the Act would be classed as lotteries. Lotteries can only be run in support of good causes, not for private or commercial gain and it is an offence to run a lottery without an operating licence.
The advice note warns organisers of house competitions that they could face prosecution. The Commission nevertheless states that, in principle, an individual disposing of a property through a house competition can use a genuine prize competition to do so. The Commission’s message is that the circumstances in every case will be different and one scheme being allowed to progress does not mean that others will not result in prosecution.
The Commission explains that its role is to monitor the boundary between prize competitions, free draws and lotteries in order to ensure that those operating lotteries are properly licensed. It says that, despite claims to the contrary, the Commission does not, in any circumstances, give prior clearance to house competitions. As the Commission explained in its October press release, anyone considering such a competition should take account of the Commission’s guidance on prize competitions and free draws, which outlines the requirements of the Gambling Act 2005 and take independent legal advice before proceeding.
Where the Commission has concerns that a house competition may be an illegal lottery, it will normally write to the organisers to alert them. This letter requests information from the organisers in order to assess whether the scheme does amount to a genuine prize competition. Organisers will also be advised to seek legal advice before commencing or continuing and where they cannot assure themselves of the legality of what they are doing, to cease activity and return monies already taken.
The advice note also states that where the Commission considers that a scheme is an illegal lottery, a criminal investigation is “likely” to be commenced.
The language in the Commission’s advice note is, as one would expect, that of admonishment not encouragement. The note therefore inevitably shrouds the area in uncertainty. In its earlier general guidance on prize competitions, the Commission warned against competitions that ask just one simple question, the answer to which is widely and commonly known or is obvious from the material accompanying the question. These would fail to meet the test in the Act and would be classed as lotteries because the simple question fails to eliminate a significant proportion of actual or potential entrants. The Commission also said, however, that it did not think a particular question or clue failed to qualify as involving skill or knowledge just because the answer could be discovered by basic research on the internet.