After controversy over whether a gambling licence was needed, house owners the Wilshaws who offered their home as the prize in a pay to enter competition, have drawn the successful entrant. But has an Advice Note published by the Gambling Commission cleared the air? Candice Macleod reports.
Topic: Promotion marketing
Who: The Wilshaw Family
Where: The Gambling Commission
When: 13 May 2009
Law stated as at: 31 May 2009
A legal perspective
Competitions and lotteries are tightly controlled under the Gambling Act 2005 (the “Act”). It is against the law to run a lottery for personal profit. However, competitions can be run for profit on the condition that the entry process involves the required element of skill or judgement.
s.14(5) of the Act states that a process which requires persons to exercise skill or judgment shall be…treated as relying wholly on chance (and thereby fail the skill test) if:
(a) the requirement cannot reasonably be expected to prevent a significant proportion of persons who participate in the arrangement of which the process forms part from receiving a prize; and
(b) the requirement cannot reasonably be expected to prevent a significant proportion of persons who wish to participate in that arrangement from doing so.
The Wilshaws could not sell their Devon house so decided to offer it as a prize in a £25 to enter, two stage competition run online. Stage one was stating correctly the price of a particular type of UK fishing permit. Stage two was a draw with the first entrant selected winning the house.
The Wilshaws attracted 46,000 paying entrants, but then complications arose. Amid allegations that insufficient skill was needed to pass the legal skill test thus putting the competition at severe risk of being an illegal lottery, the draw was put on hold.
The element of skill in the Wilshaws’ competition was answering a single question about the price of a fishing permit. This would have been hard for most people to answer independently but easy to answer with the use of an internet search tool. If the question was answered incorrectly, the website prompted entrants to try again and no money was taken until the correct answer was submitted.
Was this sufficient skill to save the Wilshaws from committing a criminal offence and having to abandon the competition and repay all the entry fees?
Over six months then elapsed but it appears that the Gambling Commission has now given the competition the go ahead with the draw having taken place at 10 am on 19 May 2009.
Commission causing confusion
The Wilshaws claimed that their competition and methods had been cleared by the Gambling Commission before they ran it and in September 2008 the Commission released the following statement:
“It does not matter that the answer can be found from basic research on the internet. If this was the case then it would rule out virtually every question and answer skill competition. It is clear that a person is not eligible to enter the draw without answering the question properly, which stops it being a lottery”.
The Commission later retracted this advice and issued an apology for it. In doing so, the Commission acted in apparent contradiction to advice allegedly given previously to the Wilshaws’ lawyers before the competition was first launched, to the effect that there was sufficient skill involved in winning to prevent the competition from being an illegal lottery.
The Commission have now caused further confusion by publishing a note about house competitions but failing to offer guidance beyond saying that they must comply with the Act. The Commission has not returned requests for comment in order to clarify this issue.
The Commission has apparently written to 50 people to warn them of the potential illegality of prize competitions as a mechanism to sell houses. The Commission has not identified the targets of its investigations or clarified whether these have been concluded or will result in prosecutions.
Why this matters:
The question of what constitutes a legal prize competition and what constitutes a lottery has been a controversial one in the past. The Act was intended to clamp down on competitions with entry questions that were too easy and designed only to get around restrictions on the operation of lotteries. However, the current guidance from the Commission has been criticised for failing to reflect the fact that any general knowledge-based question can be answered by a quick word search on Google.
The Commission is primarily responsible for enforcement of the lottery provisions of the Act and has the power to prosecute alleged offenders, yet the legal situation remains far from clear with the Commission saying only that its guidance on such competitions will be the subject of consultation and revision this summer.
This is not impressive and those in a position similar to the Wilshaws, consumers and businesses looking to operate legitimate, skill-based, prize promotions all deserve better. We look forward to clear guidance from the Commission just as soon as possible.