At a recent Gambling Act seminar presented by ISBA, the Gambling Commission’s Deputy Chief Executive offered views on key points for prize draw and competition operators looking to stay compliant with the new law. Fellow speaker Nick Johnson reports on this and more guidance since published by the Commission.
Topic: Promotion marketing
Who: Gambling Commission
When: October 2007
Law stated as at: 30 October 2007
At a recent forum open to the public (ISBA's Gambling Act seminar, at which Osborne Clarke's Nick Johnson also spoke), the Gambling Commission's Deputy Chief Executive Tom Kavanagh offered some insights as to the Commission's approach on certain prize draw and prize competition issues.
These included the following:
- No dedicated enforcement unit. Mr Kavanagh confirmed that the Commission will not have a dedicated unit focused on monitoring prize promotion compliance issues. The Commission could choose to investigate promotional activities unilaterally. But in practice Mr Kavanagh's view was that the Gambling Commission would only be likely to investigate following a complaint.
- "Significant proportion". The test under section 14(5) of the Gambling Act 2005 (as to whether an initial skill stage is sufficient to prevent an arrangement being a lottery) hinges on what amounts to a "significant proportion" of participants or of persons who wish to participate. But neither the Act nor its accompanying explanatory notes gives any clue as to what "significant" means for these purposes. (Is it 5%, 25%, 50%, 75%…?). Mr Kavanagh explained that the Gambling Commission has received legal advice to the effect that it should not give guidance on this issue. His personal view (although he made it clear that this was not official Gambling Commission guidance) was that he would regard 'significant' as not being as much as a majority.
- Gaming risks. Mr Kavanagh accepted that certain kinds of prize promotion could potentially be caught by the extremely broad definition of "gaming" at section 6 of the Act ("playing a game of chance for a prize"). He counselled against running poker-themed promotions (and similar), on the basis that these would be more likely to lead to public complaints and accusations that the promotional activity in question would amount to gaming. However he accepted that computer game tournaments (and other forms of interactive promotion) could technically be caught by the "gaming" definition if any random element was involved, even if entry was completely free. He was able to offer little comfort to promoters on this point, other than to point out that prosecutions would generally only be brought if the "public interest" test in the Crown Prosecution Service guidelines were met.
- Quiz questions and web/email alternative entry routes. The Commission has been in discussions with certain broadcasters on the approach that they should take as to quiz questions where the main entry route involves a premium rate call or text message. It expects to announce guidance on these points in the next few weeks. In the meantime it has agreed a moratorium with broadcasters, whereby they can continue their existing practices pending the Commission's announcement. Reading between the lines, it sounds like we can expect the Commission to issue guidance as to the total number of alternative answers that must be offered in multiple choice quiz questions and the number of alternatives that must be "plausible". It also sounds as though the Commission may give guidance as the circumstances when web or email will be acceptable as an alternative entry route. Apparently, one possibility being considered is that these would only be acceptable if the time period for response is at least three working days. (The Commission has already indicated formally that it would be likely to regard internet or email routes as ineffective alternative entry routes in circumstances where a rapid response is required, as home access to the internet is by no means universal and use of the internet would not in those circumstances generally be as convenient as use a phone or text entry.)
Why this matters:
There are still some significant areas of uncertainty relating to the new regime for prize promotions under the Gambling Act 2005. So any guidance from the Gambling Commission – the key enforcement body in this area – should be welcomed. But it is disappointing that the Commission's advisers believe that it cannot or should not give guidance on what a "significant proportion" means for the purposes of s.14(5). Of course, it is not up to the Commission to state what the law is: that is for Parliament and the courts. But it is surely open to the Commission to give businesses some guidance as to its enforcement approach in this area.
(Perhaps this is more a political than a legal issue. After all, if the Commission were to give guidance on this point and were to name a figure of 40% or less then this would amount to a softer approach on skill questions than applied prior to 1 September 2007. In Telemillion, one of the key cases on the (different) skill test under the old Lotteries and Amusements Act 1976, a skill question which knocked out 40% of participants was held not to be sufficient and the scheme was held to be both an illegal lottery and an unlawful competition.)
It is also disappointing that the Commission does not feel able to give more comfort to businesses as to the risk of their promotional activities being categorised as "gaming" under the Act. In marketinglaw.co.uk's view, it is wholly unacceptable that free-to-enter promotional activities such as online computer game tournaments should carry a risk of criminal sanction. And even if there is a reasonably low risk of prosecution, the position under the Act could leave promoters exposed to civil law consequences too. Suppliers (eg of valuable prizes) may seek to walk away from contracts, arguing they are not enforceable as a matter of public policy. Insurers may argue that cover is not available for gaming activities. Surely it is time that the Secretary of State issued regulations to clarify these points pursuant to section 6(6) of the Act.
Finally, the moratorium that the Gambling Commission has apparently extended to broadcasters explains why we are still seeing prize competition formats on TV that we did not expect to survive the introduction of the new Act.
Since this article was written, the Gambling Commissioned has issued further written guidance (on 2 November 2007) on prize draws and competitions. See here. This confirms the expected "3 working days" rule for web and email as alternative entry routes. It also offers some guidance as to the Commission's likely enforcement policy with multiple answer quiz formats. This states that the Commission "will not generally take action where there are sufficient plausible alternative answers, the question is relevant to the context in which the competition is offered, the correct answer is not obviously given close to the question and 'joke' answers are avoided". (But no guidance is given as to what number of plausible alternatives would be "sufficient", and it's by no means clear what is intended by the 'relevance' test…) As far as other formats are concerned, if they require "skill, knowledge or judgment of an equivalent standard to [that just described in relation to multiple answer quizzes]" then the Commission states that it "would not take action".