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Law: Prize draws, free draws and lotteries – don’t take a chance

The Gambling Commission has introduced new guidance on free draws, prize competitions and lotteries.

The first issue anyone who proposes to run such a promotion must consider is whether it is a lottery.

The key elements of a lottery are:

  • payment to participate
  • prizes are allocated
  • allocation is wholly by chance or by a series of processes, the first of which is wholly by chance.

    If the scheme falls in this definition then the statutory provisions apply.

    In prize competitions success depends on exercise of skill, judgement or knowledge and hence is outside the controls.

    With prize competitions the element of skill, judgement or knowledge must be sufficient to deter a significant number of people from having a chance to win. Guess the colour of Rudolf’s nose would not qualify. Nor would guess the colour of Santa’s nose when he’s drunk all the sherry.

    Free draws are not lotteries since there is no payment.

    The participant must have the opportunity to enter free (but this can include ‘standard’ payment for communication) even thought there is an alternative ‘paid’ route. Payment to discover whether a prize has been won would not be considered ‘free’. There must be publicity of the ‘free’ route to entry and needless to say there should not be any difference between ‘free’ and ‘non free’ routes when allocating prizes.

    There is one new provision, which allows product promotions providing the purchase of the goods does not include any element over and above the cost of the product. Beware though, the promotion involving selling a ‘carrot for £10’ will be deemed illegal.

  • Visit www.lawgistics.co.uk or call 0870 26 77 118 for more information.
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