PRIZE COMPETITIONS AND FREE DRAWS:
So you are thinking about running a promotion? Great, we all love those! The first thing you need to decide is whether to run a competition with the question and prize draw, or a ‘golden ticket’ random win because the law treats each differently. The main differences are:
Lotteries v Prize Competitions
A lottery is where the outcome depends on chance:
– In a prize competition the outcome depends on the exercise of skill, knowledge, or judgment by the participant
Lotteries can only be run for good causes:
– Prize competitions can be organised commercially for private benefit and profit
A licence from the Gambling Commission is required to run a lottery:
– No licence is required to run a prize competition
A quick guide Running prize competitions and free draws is available from the UK Gambling Commission. This factsheet only deals with prize competitions and free drawers, not lotteries.
PRIZE COMPETITION OR FREE DRAW?
A PRIZE COMPETITION is one where the outcome is determined by the application of skill, judgement or knowledge.
Under the Gambling Act 2005 a genuine prize competition is run in a way that the organisers believe that the requirement for skill, knowledge or judgement will either:
- Deter a significant proportion of those who wish to enter from doing so, or
- Prevent a significant proportion of those who do enter from winning a prize.
A FREE DRAW is either:
– free to enter – meaning there is ‘no charge’ and even if entrants pay for postage, that is at standard rates. NOTE if entry is by ‘special delivery this is not classed as free entry.
– paid & free to enter – here you operate both a paid and a free to enter route ensuring that:
- people can genuinely choose to take part without paying
- the free entry route is displayed with as much prominence as the paid for routes
- the free entry route is no more expensive or no less convenient than the paid route
- the choice of free or paid is publicised to allow entrants to choose
- the system for allocating prizes does not distinguish between each route
Q: I have asked entrants to “solve” a problem and only correct answers will be entered into the free draw to win one of my products or free services? Is this a prize competition?
A: Where entrants have to solve a large number of clues and where only fully completed entries are submitted, these qualify as prize competitions even if those who successfully complete the puzzle are subsequently entered into a draw to pick the winner.
Q: I have asked entrants to answer a question, but the answer is in the promotional material shown on the competition page of my website. Is this a prize competition?
A: If you ask just one simple question, the answer to which is widely and commonly known or is blatantly obvious from the material accompanying the competition, this is probably NOT enough to meet the test of skill and judgement that would deter or prevent entry. Generally, the more questions or clues that have to be solved, or the more obscure or specialist the subject, the more likely it is that the competition is not one based on chance and therefore a lottery.
Q: I am offering free entry on production of a receipt showing my products have previously been bought, as well as offering anyone a chance to enter for free without a receipt online. Is this still a free competition?
A: Asking for proof of purchase is not considered a payment for entry, provided the cost of the product is not increased to add a fee to participate in the promotion. You must however make it really clear that entry without a receipt can be done online and make that entry that way clear.
Q: I want to ‘vet’ answers to that only people who have agreed to share their information with my business or join our mailing list can win. Is this still a free competition?
A: Provided you state this in your rules as part of the criteria to enter, providing an email address or some other data is still ‘free entry’. You must be aware of your obligations under the Data Protection Act 2018 in respect of keeping customer data.
Q: I want to offer a prize to people who complete a survey – is that a prize competition?
A: Providing data is generally not considered ‘payment’ and so entry is still free, but this does depend on the amount of information you request.
Q: Do I need terms for my competition.
A: Yes, it is advisable to have terms for your competition setting out how it is run and the basis of the draw. Contact us for more information.
THIS IS A GUIDE. IT IS NOT LEGAL ADVICE © 2020 Lionshead Law Ltd