Note: This advice is given by the CAP Executive about non-broadcast advertising. It does not constitute legal advice. It does not bind CAP, CAP advisory panels or the Advertising Standards Authority.
The Background of Section 8 of The Code states:
“Promoters should take legal advice before embarking on promotions with prizes, including competitions, prize draws, instant-win offers and premium promotions, to ensure that the mechanisms involved do not make them unlawful lotteries (see the Gambling Act 2005 for Great Britain and the Betting, Gaming, Lotteries and Amusements (Northern Ireland) Order 1985 (as amended) for Northern Ireland).”
What might count as an illegal lottery?
CAP understands that lotteries are generally illegal unless licensed by the Gambling Commission or they are a small or private lottery or part of the National Lottery. A prize promotion might be considered an illegal lottery if winner selection is based on chance, and participants are required to pay to enter or to pay for goods at a price that reflects the opportunity to participate.
Prize competitions, unlike lotteries, do not need a Gambling Act licence. A prize competition must require entrants to exercise skill or judgment or to display knowledge, such that it can reasonably be expected to prevent a “significant proportion” of people from participating or from receiving a prize. Advertisers should contact the Gambling Commission or seek legal advice in relation to what constitutes sufficient skill or judgement. Marketers may charge for entry to a prize competition. A competition that does not involve some skill or difficulty will be treated as a process that relies wholly on chance, and therefore classed as a lottery. The rules on advertising lotteries are set out in Section 17 of the CAP Code. See also and Betting and Gaming: Lotteries.
See CAP Guidance on the marketing of promotions with prizes, and Promotional Marketing: Competitions for more information about running compliant competitions
What counts as payment to enter?
A prize promotion might be considered an illegal lottery if participants are required to pay to enter or to pay for goods at a price that reflects the opportunity to participate. Examples of prices that reflect the opportunity to participate include increasing the price of a promotional pack compared to non-promotional packs before, during or after the prize promotion or reducing the quality or composition of the paid-for product or service during the promotion.
If participants must pay to enter a prize draw, or make a purchase which reflects the opportunity to participate, a free entry route, will be required in the UK generally, to ensure that the promotion is not an illegal lottery. Information about a free entry route should be presented in a way which ensures that those who see the ad and want to participate can see it and should be promoted at the same level as the paid for route. Promoters should consult the Gambling Commission guidance on Free Draws and Competitions, and seek legal advice to ensure the presentation and mechanism of any free entry route is sufficient.