Reforms to our laws affecting free and pay to enter prize promotions are on the way. We report on the latest stage in the process and look at the implications for ‘no purchase necessary’.
Topic: Games of chance and skill
Who: The Department for Culture, Media and Sport of the UK Government
When: June 2004
The UK Government published its response to the first report of the Joint committee of the House of Commons and House of Lords on the Gambling Bill.
As previously reported on marketinglaw, the Parliamentary report had much to say about the Governments' proposals for reforms to UK gambling laws. These include changes to the laws governing prize promotions and to controls over gambling ads.
Health warnings in gambling ads?
In its report, the Joint Committee was dubious as to whether a health warning scheme in gambling ads would be appropriate. As an alternative the Committee recommended that gambling ads include information about sources of help for problem gamblers.
In its reply, the Government notes this recommendation and agrees with the broad thrust of the Committee's observations. Information about available sources of guidance on gambling behaviour may well be a useful requirement for gambling advertisements, the report states, and the Government will consult relevant stakeholders, including the ASA, before including such a requirement in ad regulations or licence conditions.
So it appears that health warnings as such in gambling advertising are unlikely, but the mention of "regulations" raises again the spectre of a new delight for gambling advertisers, "Gambling Advertisement Regulations." As to which read on.
Self regulation for gambling ads?
The Joint Committee recommended the continuation of the existing and seemingly effective self regulatory model for gambling ads, with power reserved to the Gambling Commission to assume regulatory responsibility if it turned out that self regulation was not working.
In its reply, the Government accepts that the new law should not preclude the continuation of controls guided by the ASA and the CAP code. However, the Government believes that the risks involved in gambling do require there to be a statutory underpinning for controls that can have effect if existing arrangements are seen to have lost their protective effect.
The Government's current policy therefore is that the content and conduct of advertising conducted by Gambling Commission licensees should be controlled by operating licence conditions imposed by the Secretary of State or the Gambling Commission. Advertising conducted by all other persons, other than on TV or radio (which will continue to be regulated by OFCOM) is to be controlled by regulations made by the Secretary of State.
In the operation of this system, it would be open to the Secretary of State and/or the Gambling Commission to make licence conditions that require compliance with the CAP codes, but the general thrust of the Government's comments suggests that there will be separate, detailed regulations controlling gambling advertising, to be enforced in the first instance by the Gambling Commission.
The Joint Committee recommended that adequate resources be available to the Gambling Commission to enable it to initiate prosecutions against those conducting lotteries that will be illegal under the new legislation. In its reply the Government accepts these recommendations and assures the Committee that the Commission will be adequately resourced to pursue illegal lottery operators. That will certainly be a change from the current enforcement landscape if it happens.
Premium rate telephone entry events
The current intention of the Gambling Bill is to make it crystal clear that the use of premium rate telephone calls as an entry mechanism for prize events should be treated as a form of payment to enter.
The Joint Committee was concerned as to whether the definitions in the Bill were clear enough to have this effect. In its reply, the Government believes that the current drafting already achieves the objective. It says that a reference to a pay to enter scheme does not include a reference to incurring the expense, at normal rate, of making a telephone call. A normal rate is defined as "a rate which does not reflect the opportunity to enter a lottery." This means that, in the Government's view, under the Bill, wherever a rate is charged which reflects the opportunity to enter a scheme, as will be the case with a premium rate call, this will constitute payment to enter. The cost of the call, or the premium above the normal rate, reflects the opportunity to enter the lottery.
Purchase to enter
The Joint Committee welcomes the Government's suggestion that buying goods should not be considered as payment to enter a lottery accompanying those goods. This is provided the goods are sold at normal price. The Committee was concerned, however, at the possible abuse of these provisions and recommended that the Gambling Commission issue guidance on the meaning of the "normal price" for goods.
In its reply, the Government accepts this recommendation and also a suggestion of using Trading Standards rules as a guide to determining what is "normal."
Bona fide sales promotional draws
The Joint Committee wanted the Bill beefed up to make it absolutely clear that "bona fide sales promotions" should not be treated as lotteries.
In its reply, the Government agrees that bona fide sales promotional draws should not be treated as lotteries (provided that the cost of buying the goods involved does not reflect the cost of entry into the draw) however the Government believes that the Bill as drafted achieves that objective.
The Joint Committee agreed with the Government's aim to preserve non-commercial lotteries and distinguish them from commercial prize competitions. The Committee was not persuaded, however, that the drafting of the Bill was sufficiently clear to create a workable and certain regime that would achieve this. In particular it recommended that a definition of "prize competition" should be included in the Bill so that these could easily be distinguished from lotteries. This would also ensure that prize competitions with an inadequate skill element (which will continue to be illegal) could be easily identified.
In its reply, the Government agrees that the distinction between lotteries and prize competitions should be as clear as possible, it therefore agrees to give further consideration to the possibility of including a clause which specifically deals with the definition of a prize competition.
Come back the existing legal prize competition definition (any event in which success depends to a substantial degree on the exercise of skill) all is forgiven?
Why this matters:
The issuing of the Government's response to the Joint Committee's report is another significant stage on the way to the introduction of the new Gambling Act. In the area of gambling advertising and prize promotions, the Government appears to have listened to much of what the Committee had to say, but for the most part it remains set on the course presaged by the Gambling Bill some months ago.
It is therefore clear that the Government is intent on legalising purchase to enter promotional prize draws. In other areas such as prize competitions, it is still unclear how the Government proposes to clarify the law beyond its current unsatisfactory state. We will have to wait and see the colour of the Government's drafting in the next version of the Bill as published.