With publication of the Draft Gambling Bill, the picture on planned changes to UK law affecting prize promotions becomes clearer. Is much going to change? We investigate
Topic: Games of chance and skill
Who: The Department for Culture, Media and Sport
When: November 2003
The Government published the draft Gambling Bill, designed to modernise the UK's outdated gambling laws and create a brand new, single gambling control body, The Gambling Commission.
One of the creaking statutes which it will completely supersede is the Lotteries and Amusement Act 1976. This currently contains the essence of the UK's laws affecting promotional prize draws and competitions.
The DCMS has published three documents. First there is the draft Bill itself, secondly there is a document entitled "The Policy" and thirdly there are "Explanatory notes" to the draft Bill. It appears that the draft Bill itself is incomplete, with further clauses promised in 2004. "The Policy" is billed by Minister Tessa Jowell as "describing the full breadth of our policy in order to inform discussion."
But the "Policy" does not get off to a spectacular start in the section headed "Lotteries."
Paragraph 4.45 proclaims "as part of the Government's determination to protect lotteries from commercial exploitation, the draft Bill will include a distinction between lotteries and prize competitions." This is hardly ground breaking stuff, since the 1976 Act contained a very similar set of provisions.
The para goes on to state "where it is clear that payment is required for entry (ie there is no genuine free entry route) or the result depends completely on chance, a competition will be a lottery and may not be run for commercial purposes."
Again, no major changes to existing law here. It has for years been accepted and understood in the industry that a pay to enter prize draw will be legal provided a genuine, unlimited and realistic free entry route is provided. The drafting of this last quote is also sloppy. Surely it should be "and" not "or" before "the result." The phrase "a competition will be a lottery" is also confusing. If the result depends completely on chance, then surely the event is not a competition at all, since there is no competing, only a pure luck "draw."
When event will be regarded as "pay to enter"
The draft Bill contains detailed provision on when a draw will be an event on which payment is required for entry and will therefore be a lottery, which is by definition illegal unless it is the National Lottery, licensed as for good causes or a small scale society etc event.
The Bill makes it clear that "payment" is not restricted to monetary payment. It also covers payment in money's worth (for instance, by means of tokens) and payment for goods or services at a rate that reflects the opportunity to enter the lottery (for instance, by means of a premium on the usual purchase price).
It is also stated that payment required to take possession of a prize or to find out what a person has or might have won in a draw counts as if it were payment to enter. The drafting also makes it crystal clear that if there is a payment involved in entering a draw, it does not matter to whom the payment is made. If everything depends on pure luck and a payment has to be made to enter, then a commercial event run on these lines will be a lottery and therefore illegal.
When payment will not make an event "pay to enter"
The Bill goes on to indicate situations where, even though some form of payment is required to enter, this will not render a commercial draw illegal. These include having to send a letter by ordinary post or making a telephone call or using any other means of communication at the normal rate. These will not count as making a payment for these purposes. A "normal rate" is a standard rate with no uplift to reflect the opportunity to enter the lottery: so a "premium rate" telephone call would be considered as constituting a payment to enter.
So it is clear from this that even if a prize draw has a pay to enter mechanic, providing a free entry route, for instance by way of first class post, would on the face of it enable the event to avoid the "lottery" trap and stay legal. However this is not the end of the story.
Free entry route requirements
The alternative free entry route must be sufficiently publicised and a person who enters by this route must be no less likely to receive a prize than a person who pays to enter. The free entry must also be no less convenient to use than any other means of entering.
Now for competitions, where some skill is needed in order to win. Here things get a little murkier. All that the Bill apparently says at this time is that even if entrants to a prize event have to exercise skill of some description in order to enter, if the skill required is of a kind which is unlikely to serve as a barrier to entry for any person who wishes to enter it, this will not prevent the allocation of prizes from being regarded as wholly by chance. In other words, if a payment is required to enter such an event, and there is no alternative genuine free entry route, if the skill involved in winning is not a deterrent to entry, the event will still be a lottery and therefore illegal.
Finally, in a tantalising passage, the papers indicate that the Government is contemplating legalising prize draws in which a product has to be bought in order to enter. The drift appears to be that if the product is being sold at the standard price, with no uplift on account of the promotion, then even if there is no genuine alternative free entry route, the event might be regarded as legal. However, the papers make it quite clear that the Government will not be going further down this route until the position on the proposed European Union Regulation on sales promotion becomes clearer.
This final aspect and the fact that the Gambling Bill itself did not make a specific mention in the Queen's speech in the opening of Parliament in November 2003, indicate that we will be lucky if any of these new provisions have the force of law before 2005.
Why this matters:
UK marketers running prize promotions have long suffered under out of date and overly complex prize promotion laws.
It was hoped that with the appearance of the Gambling Bill, all would seem set fair for a wholesale updating and clarification of the relevant law. So far, however, the Gambling Bill and its accompanying documents are something of a disappointment. They appear to do no more than codify existing statute and common law in this area so far as pure luck prize draws are concerned, whilst the position on skill competitions is still highly unclear and if anything a step back from the position as of today, where we can be certain that if success depends to a substantial degree on the exercise of skill, the event will be legal regardless of whether it is pay to enter. The prospect of facing an alternative test, namely whether participants would be any less likely to enter as a result of having to deal with the skill element, seems like a recipe for litigation rather than clarification and simplification.