The Gambling Act 2005 sets the rules for prize competitions, lotteries and free draws. It’s important to understand the difference as getting it wrong can be costly and may affect your reputation.
What is a lottery?
Broadly speaking, a simple lottery has three elements:
- Payment is required;
- Prizes are awarded (one or more); and
- Those prizes are awarded by chance.
There are more complex lottery arrangements, which in addition to the above, have a series of processes for prize allocation, where the first of those processes rely wholly on chance.
Public lotteries are reserved for good causes and must, unless it qualifies as exempt, operate under a licence from the Gambling Commission (the Commission).
What is a prize competition?
In brief, a genuine prize competition is one where the outcome is determined by the application of skill, judgement or knowledge. It should be run in a way that the organisers believe that the requirement for skill, knowledge or judgement will either:
- Deter a significant proportion of those who wish to enter from doing so, or
- Prevent a significant proportion of those who do enter from winning a prize.
What is a free draw?
Under the Act there are two types of free draw. The first is where all entries are free, and the second is where there is both a paid and free entry route.
‘Free’ is any method of communication charged at the normal rate, and specifically mentions the use of first or second class post. ‘Normal rate’ means that there can be no additional payment over what it normally costs to use a particular method of communication. For example, special delivery is not classed as free.
Running a free draw with a paid entry route
Where this applies you must ensure that:
- People can genuinely choose to take part without paying;
- The free entry route is no more expensive or no less convenient than the paid route and charged at its normal rate;
- The choice is publicised so that it is likely to come to the attention of anyone intending to participate;
- The system for allocating prizes does not distinguish between either route; and
- The free entry route is displayed with as much prominence as the paid for routes.
You do not need permission or a licence from the Commission or a licensing authority to run genuine prize competitions or free draws, as long as they are organised in a way that means they meet the requirements of the Act. As stated earlier, if your competition relies on chance rather than skill, knowledge or judgement, it may be considered a lottery and could be illegal.
This was a brief summary, if you would like more information on this topic follow this link.