Gambling Commission issues guidance on Gambling Act 2005

The Gambling Commission – the Regulator in charge of enforcing gambling law in the UK – has created some guidance on the relatively recent legislation, the Gambling Act 2005. The Act came into force just over two years ago. The Act prohibits illegal lotteries, but genuine prize competitions and free prize draws are acceptable. The dividing line is not totally clear from the Act. One controversy over the interpretation has involved houses which have been sold through competitions over the Internet. They have been controversial because of doubts over whether the qualifying questions were tough enough, or whether those schemes were really an illegal lottery.

The Act says a lottery occurs where people have to pay to participate, prizes are awarded to scheme participants and the prizes are either awarded wholly by chance or the first part of the process is wholly by chance. As to whether something is a prize competition (and therefore acceptable), depends on whether something is wholly by chance or whether entrants are required to exercise skill, judgment or knowledge. The Act says it will not be treated as wholly by chance if either: the requirement cannot reasonably be expected to prevent a significant proportion of people who participate from getting a prize; or the requirement cannot reasonably be expected to prevent a significant proportion of people who wish to participate from doing so.

The Guidance says that in many cases whether the competition involves sufficient skill, judgment or knowledge is clear – for example a crossword puzzle. These are ok even if the successful entrants are then entered into a draw to find a winner. At the other extreme are questions that ask just one simple question, where the answer is so obvious or common known that the competition does not pass the hurdle. The guidance says that it is hard to say for sure where is the dividing line, but the more questions or clues or the more specialist knowledge, then the more likely it is not to be a lottery. However, interestingly, the Commission says that it does NOT think the requirement is met where the answer can be found easily on the Internet, is widely known by the public or appears in accompanying text or narrative.

The Commission said that the phrase ‘significant proportion’ is to be given its ordinary, natural meaning. It refused to give a suggested percentage and said a lot depended on the context of the particular case. The Commission is likely to be satisfied where organisers can produce evidence showing they have taken steps to estimate that the likely proportion of people eliminated will be significant. It has suggested the following non-exhaustive list of indicators:

• Whether there are sufficient plausible multiple choice answers, and ‘joke’ answers only being used when there are sufficient other alternatives.
• Whether the correct answer can be found near to the question.
• How many questions are asked.
• The type of format – for example, complex logic puzzles that are not simple.
• Higher prizes need greater skill or knowledge to deter people from entering than competitions with low prizes.

Interestingly, in the case of free prize draws, the Commission also stated that provision of someone’s data to enter a draw would not generally amount to ‘payment to enter’, and this would therefore not make it illegal. There were some exceptions, though – for example if the data was intended to be sold to third parties. The Commission further added that product promotions – where free prize draws were added with the cost of the products – were not a problem as long as the promoter did not charge any more than it would otherwise have done for the underlying item.