The dramatic last gasp, pre-general election passing of the Gambling Act will bring radical changes to the UK’s prize promotion laws. Were there any last minute changes and when will the new laws come into force?
Topic: Games of chance and skill
Who: HM Government/The Department for Culture, Media and Sport
Where: Whitehall
When: 7 April 2005
What happened:
The Gambling Act finally received the Royal Assent, although the date when the statute will actually come into force will not be announced until after the general election.
Whilst all the surrounding publicity focused on the Government being forced to climb down on the number of super-casinos that the new legislation would allow (down to one) much of the proposed legislation radically changing the UK's laws affecting prize promotions was passed through on the nod and is now set to become law on the appointed day.
Also published at the same time were Explanatory Notes, but unfortunately they make no helpful reference to the new laws as they affect prize promotions.
We have already reported here on marketinglaw on the gist of the proposed changes. You can also find, in a separate April 2005 update, the final provisions of the new statute that are most relevant to prize promotions, marked up to show the tiny number of changes that were made in the last stages of the Bill's Parliamentary passage.
We get a sense of these last stages in a ministerial statement on the Gambling Bill published on 4 April 2005 by Minister for Sport and Tourism, Richard Caborn. Below we pick out the highlights of that statement from a prize promotion point of view.
Payment to enter lotteries and prize competitions
Unlike the existing law of the UK, where the legality of prize competitions is not dependent upon whether they are free or pay to enter, under the new law, whether the event is free or pay to enter will be critical to a legal assessment.
There were suggested amendments to the provisions defining what 'pay to enter' actually meant. In a 'purchase to enter' scenario, for example, these stated that an event would be regarded as pay to enter if the price of the item to be purchased 'reflects the opportunity to enter'. Amendments were tabled here suggesting a requirement that the price of the relevant item 'should be calculated so as to reflect' the opportunity to enter, but the Government has rejected that proposal. It also believed that proposed amendments relating to the 'normal rate' for, for example, a telephone call entry event (as opposed to premium rate) were unnecessary.
More free entry route clarity?
Another rejected amendment was in the context of alternative free entry routes. These, as with the current laws, will be crucial to preserving the legality of prize draws. There was a suggestion that the alternative free entry route, reflecting again current principles applied, should be expressly required under the legislation to be 'genuine, realistic and not unduly inconvenient.'
The Government patronisingly said that it agreed with the amendments, but also believed that this was the effect of the new legislation as it stood. If there is a pay to enter route, the current drafting requires a choice between paying to enter and entering through a form of communication. If this "communication" entry route is not a genuine or realistic option, the Government says, the requirement for a choice cannot be said to have been fulfilled.
The existing drafting also requires that what is called the 'free communication route' in the new law must be no less convenient than entry by paying and this is designed precisely, the Government says, to rule out schemes that are not genuine or realistic.
If, for example, the ministerial statement says, an individual has a choice between paying to enter and travelling to an inconveniently located office, this will not be a genuine or realistic free communication entry route. But this will not, the Note continues, prevent companies using what "might be" legitimate free entry routes such as emails.
Payment to collect a prize
Other provisions in the new statute make it clear that if there has to be a payment to collect a prize, then the event itself will be regarded as pay to enter. Amendments were tabled here seeking to clarify that a requirement to pay in order to collect a prize would only be deemed to be pay to enter where the payment was to the arrangement promoter or his associate.
The Government does not believe, however, that these amendments are necessary: payments for anything other than possession of a prize itself, the Note states, cannot be payment to enter for the purposes of the Act. We suspect this assertion might come back to haunt advisers and courts in the future.
Lotteries and skill levels
Under the new law, prize promotion mechanics with an insufficient level of skill will continue to be illegal. The legality will arise, however, by a slightly different route to the present day. Currently, section 14 of the Lotteries and Amusements Act 1976 states that a competition will be illegal unless success depends to a substantial degree on the exercise of skill. Under the new laws, a prize promotion mechanic with insufficient skill will simply be regarded as a lottery and therefore by definition illegal.
Changes made
Various amendments were tabled in the latter stages of the passage of the Bill seeking to 'clarify' the exact level of skill that would be required to ensure that the prize promotion mechanic was not a lottery. It is quite clear that there were numerous representations on this issue, and the Government has in this single isolated care acceded to some of the requests.
One proposed amendment that was rejected was in the form of an amendment reflecting the current UK law and re-introducing a requirement of 'substantial skill.' The Government has rejected this proposal, however, on the basis that it introduces 'an unreasonably stiff test.' An interesting comment given that this is pretty much the same test that has been applied under UK law for nearly 30 years.
The Government says smugly that it 'prefers its own amendments to the relevant provision, which seek to make the definition of lottery more user friendly, without diluting the level of the test or the principle underpinning it.'
The Government amendments, the ministerial Note continues, introduce the notion of a 'reasonable expectation' into the test. "This changes the nature of the test from a strictly empirical one to a normative one and therefore improves, "it says here", its practical application."
The end result of this is as follows. Before the final changes were made, a prize competition would still be regarded under the Bill as a lottery if the skill, judgement or knowledge required to win failed to prevent a significant proportion of persons who wished to participate in that arrangement from doing so and failed to prevent a significant proportion of participants from receiving a prize.
In the final version, a prize competition will be illegal if the skill level "cannot reasonably be expected" to either deter a significant proportion of potential entrants from participating or prevent a significant proportion of participants from winning prizes.
Why this matters:
marketinglaw will continue to analyse these new provisions in the coming months but it continues to be far from convinced that the proposed amendments to UK law in this area will achieve the intended purpose of simplifying a legal analysis of any prize promotion mechanic.
