Any Legal Issues If My Business Launches An Online Competition?
A great marketing tool to engage with customers, raise brand awareness, gather contact details and increase sales is to run an online competition.
Legal Issues In Promoting An Online Competition
But there are some legal issues to bear in mind which directly impact on the legality of promotional contests, giveaways and prize draws in the UK. It is important to note that these provisions do not extend to Northern Ireland and this can have significant consequences when rolling out your promotion. In addition, following a spate of Win-a-House promotions, the Gambling Commission issued fresh guidance in December 2009 to help promoters navigate the provisions of the Act.
Broadly speaking, as long as your prize competition, contest or giveaway does not fall foul of the Gambling Act’s definition of “Gaming,“ “Lottery” or “Betting” then participation in such a competition by which prizes are awarded is not considered to be gambling for the purposes of the Act.
A lottery is defined as “a promotion in which participants are required to make a payment for an opportunity to win one or more prizes (comprising of money, goods or services) with prizes being awarded using a process that is based wholly on chance”. Key issues to avoid a promotion being construed as an illegal lottery are to ensure that the process is not based wholly on chance; and/or avoiding any requirement of payment for entry.
Playing a game of chance for a prize and predicting the outcome of a race, competition or other events can be illegal under the Act. Whilst free prize draws are usually outside the definition of gaming, some promotional online games of chance may be illegal if they require careful thought, analysis and a certain degree of skill. You will need an operational licence if your promotion falls within the definition of betting, but there must also be a requirement to pay. A fantasy football online competition is a good example where a licence is now required.
Unfair Trading Regulations
Also worthy of mention is the Consumer Protection from Unfair Trading Regulations 2008 which prohibits various misleading practices in respect of prize competitions and drawers. Integrating UK law into the EU Directive on Unfair Commercial Practices, it is a criminal offence “to claim to be offering a competition or price promotion without awarding the prize is described or a reasonable equivalent”.
The example given by the OFT is a promoter who advertises a £10,000 prize scratch-card competition and then deliberately does not print, or circulate, a winning card. It is also illegal to unfairly mislead the public with the impression that the consumer has already won, will win, or will on completing a specific act win, a prize or equivalent benefit, when in fact (a) there is no prize or other equivalent benefit, or (b) the consumer must pay money or incur a cost in order to claim the prize or other equivalent benefit.
Promoters should also be aware of other legislation and regulatory codes of practice including data protection provisions, rules relating to premium rate phone services (the Phonepay Plus Code of Practice) and the CAP Code which details the requirements and administration of promotional marketing activities pursuant to the British Code of Advertising, Sales Promotion and Direct Marketing rules.
Need Legal Advice About Launching An Online Competition?
You can get free legal advice about launching an online competition with our Startup Legal Session. Book your session below and our legal experts will tell you how your business can cover its legal basis during any online competition you run.