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November 2009

SPECIAL ALERT

U.K. Law on Prize Competitions receives Clarification

Article cowritten by Brian Heidelberger of Winston & Strawn and Brinsley Dresden of Lewis Silkin.

Under the Gambling Act 2005 the organisers of prize competitions in the United Kingdom must be careful to ensure that their promotions do not constitute an illegal lottery.  To fall on the legal side of the dividing line depends upon demonstrating that the participant has exercised the requisite skill, judgment or knowledge (rather than relying wholly on chance).  The Act provides in section 14(5) a test for use in borderline cases – is the competition sufficiently challenging to deter a significant proportion of potential participants from entering or to prevent a significant proportion of actual entrants from winning a prize?  The Gambling Commission has recently issued new guidance on this tricky topic, partly in response to a rash of online “win a house” competitions being used by private individuals as an alternative to selling their house by more traditional means.  The Commission’s revised advice, published in August, warns that the use of general knowledge questions “where the answer can be found with little or no effort, or in the accompanying text or narrative” is unlikely to demonstrate sufficient skill or knowledge to be legal.  Equally, if the entrant is not required to pay until after they have got the correct answer, then the question is merely a preliminary stage, while paying to enter the resulting draw amounts to an illegal lottery.  The Commission also makes clear that it will expect the organisers of prize competitions to conduct research and/or collect evidence so as to be able to demonstrate that their particular competition fulfills the section 14(5) test. 

TIP: In the U.K., if you ask participants to pay to enter a skill-based promotion, you must make sure that the questions used are not simple general knowledge questions. Despite recent guidance from the U.K. Gambling Commission, it is still unclear whether the fact that you could find the answer with some simple internet research will create a problem. If you get it wrong, your U.K. prize competition may simply be an illegal lottery!

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