In August 2002, Osborne Clarke and the Promotion Marketing Association staged a public forum to debate proposals for reforms of UK prize promotion laws. Now, the Government has decided what the shape of those reforms will be.
Topic: New Law
Games of chance and skill
Replacement of Lotteries and Amusements Act 1976
In May 2002 the Government issued a consultation letter proposing changes to UK laws affecting the operation of prize promotions. This followed the report of the independent Gambling Review chaired by Sir Alan Budd, published in July 2001. This was part of a wide ranging government review of the UK's gambling laws and was followed in March 2002 by a publication of the Government's consulteties document "A safe bet for success" in which it set out its responses to the Budd recommendations.
At that time, reservations were expressed about some of the Budd report's radical proposals for new prize promotion laws. Accordingly it was decided to split this out from the general gambling review process for separate consultation.
That separate consultation started with the May 2002 letter. Osborne Clarke also played a role in that consultation process. In August 2002 it staged an open event featuring a keynote speech from Chris Bone of the Department for Culture Media and Sport, at which the options for change in the consultation letter were presented and debated.
Now, 14 months on, the DCMS seem to have finally reached conclusions on the way forward.
What will change:
Measures will be introduced to make it absolutely clear that pay to enter, pure luck prize events will be the exclusive preserve of good causes, such as the National Lottery and small-scale society events.
So much is already UK law, but new provisions in the projected Gambling Bill ("the Bill") will clamp down on events which provide a "so-called free entry route" in the small print, but are, for all practical purposes, pay to enter events. The new law will provide that for the purposes of determining whether it is or is not a lottery, a prize scheme will not be regarded as requiring payment to enter if:
? it provides a means whereby persons can enter free of charge; and
? the means of doing that are displayed equally as prominently as other means of entry in all material explaining or promoting the scheme; and
? it is no less convenient to enter for free than by other means; and
? free entries are no less likely to win all or any of the prizes advertised or on offer than entries which are paid for.
The Bill will also make it clear that a payment which is required to claim a prize or to find out whether or what the player has won should be treated as payment for entry. However, it will be made clear that the submission of an entry by a standard rate telephone call or first class postage will be treated as entry "free of charge".
So far, therefore, no comfort for those wanting to operate "purchase to enter" promotional prize draws. However, the DCMS does offer a ray of hope here. It makes it quite clear that it is seriously contemplating allowing purchase to enter prize draws so long as the goods or services being purchased are sold at their usual retail price. Having said this, the government is concerned that any change in law on this front should be in step with the general review of promotion marketing law currently underway at European Union level. Any change to the law of the UK on this front, therefore, will have to be subject, the DCMS says, to the outcome of these EU discussions.
So what of events in which prizes are offered for either forecasting future events or for the exercise of skill?
So far as forecasting events are concerned, the answer is simple. These will be regulated as betting.
As regards events in which skill has to be exercised, things get a little murkier.
The DCMS accepts that there is continuing uncertainty about the degree of skill which is required if a prize competition is to avoid being classified as a lottery. It also proposes the abolition of the present requirement that success should depend to a substantial degree on the exercise of skill, contained in Section 14 of the 1976 Lotteries and Amusements Act.
However, it is so far unclear what it is proposing in its place.
The proposed legalisation of "purchase to enter" prize draws is quite clearly stated to be intended for events in which no skill or knowledge is required. The DCMS also rejects a proposal that there should be a distinct legal category of prize competition involving the exercise of a substantial degree of skill. However, so far as alternative formulations of the "skill test" are concerned, it has nothing to suggest at this time.
It does not believe that any of the suggestions which have so far been made to it offer solutions which will be effective and workable in practice, but it has not come up with any alternative solution of its own.
Clearly one option which is totally unacceptable is to have a requirement for " a degree of skill". This will make it far too easy to introduce a very low skill "general knowledge" question and thus get out of the illegal lottery trap. One can only imagine that the DCMS is still working on their own formula for this and we will have to wait and see what comes out in the Bill.
Finally, in the area of enforcement, it is proposed that the new "Gambling Commission" to be set up will play a key role in the enforcement of the new law. It will also issue guidance to the organisers of prize competitions and promotional draws on what they should do to ensure that their offerings are legal competitions and draws and not unlawful lotteries. It will also liaise closely with other regulators – in particular ICSTIS as regulators of the premium rate phone industry – to increase protection for the public against scams and frauds.
The DCMS makes it clear that it continues to be open to suggestions as to how it might refine its proposals for law reforms in this area. It is clear that one such area is that of how to define the level of skill required to beat the "illegal lottery" rap. Marketinglaw readers may wish to put forward their own submissions on this front.
No specific timing is given in this latest document from the DCMS. It simply indicates that it is currently working on the details of the Bill. Marketinglaw's best guess is that any reforms of the law in this area will only happen at the same time as the other, more wide-ranging changes to UK gambling laws. These look set to take some while longer to reach the end of the legislative process, so we predict that the new reforms will not be coming on stream until 2005.