Game over

Lotteries and Amusements Act 1976

Section 1 provided that any distribution of prizes by lot or chance was illegal. Although nothing was said in the Act about the possibility of free entry to a promotion avoiding the restriction, this was so decided in the landmark decision in Reader's Digest v Williams [1976] 1 WLR 1109. It was this ruling which paved the way for the promotions that are such a popular feature of everyday shopping where, though a purchase will allow entry to a prize draw, the terms and conditions contain the familiar rubric 'No purchase necessary'¦'

Gambling Act 2005

The provisions of the Act relating to lotteries come into force on 1 September: the Gambling Act 2005 (Commencement No. 6 and Transitional Provisions) Order 2006/3272.

The Act imposes tight controls on gambling. Section 3 defines 'gambling' to include participation in a lottery as defined by s 14. Unauthorised gambling is an offence under s 33.

Section 14 begins by distinguishing between a 'simple' and 'complex' lottery. In the former, prizes are entirely by chance; in the latter, prizes are allocated by a series of processes. Oddly, it is only in relation to the definition of these terms that they are ever mentioned in the Act. Nothing at all appears to hang on the distinction. The Act makes good the omission in the 1976 Act by stating that an essential ingredient in the definition of a simple or complex lottery is that there must be a requirement to pay to enter. This, however, and crucially, is subject to the provisions of Sch 2 as to just what constitutes payment.

Some aspects of the Schedule merely confirm existing case law. Thus, it is irrelevant to whom any payment is made. This confirms the decision in Atkinson v Murrell [1972] 2 All ER 31. Others reverse existing case law. Thus, it is immaterial when a person makes a payment that he knows he is participating in a prize draw. In Minty v Sylvester (1915) 84 LJKB 1982, theatregoers were unaware when they bought their seats that seat numbers were to be drawn. It was held that this ignorance meant that no offence had been committed, unlike the subsequent draws which were then advertised.

The post and the phone

It has been long-established practice that, when participating in a prize draw requires entrants to use the post or the phone, the costs of an ordinary call or ordinary postage will be overlooked. This was commented on by the Independent Committee for the Supervision of Standards of Telephone and Information Services in a consultation document in June 1996 on premium rate telephone competitions.

While this may have been somewhat illogical, it has common sense, and the position is now formalised by the 2005 Act. It provides that 'payment' does not take place when what is paid is the normal rate of letter post or a phone call made at the normal rate.

Two points can be made here. Under the previous position, it was assumed that postal charges and phone calls were regarded as payment when the prize draw was run by the Post Office or a phone company. This would now seem no longer to be the case.

Second, the position with regard to premium rate calls is not at all clear. The Act refers to calls made 'at a normal rate', yet even premium calls have a normal rate. It does appear arguable that calls made at normal premium rate charges count as free entry. It would have been very easy to make specific reference to 'premium rate' calls.

A major change will be that, under the Act, buying a product or service at a price which does not reflect 'the opportunity to participate' in the draw will no longer count as a purchase. It was the fact that it did which led to the ubiquitous 'no purchase necessary' line which was much of a feature of prize draws. In so legislating, the Act has followed the precedent of the New Zealand Gambling Act 2003. It also approves the view of Denning LJ in Imperial Tobacco Ltd v Attorney-General [1979] QB 555 who held that buying goods at their normal price did not constitute payment to enter a promotion, a view rejected by the House of Lords ([1981] AC 718).

The 'no purchase' alternative

Although this will now become less necessary, the Act formalises the position established by Reader's Digest, though with refinements. It provides that payment will not be held to have taken place when participants have a choice as to whether to enter following a purchase or to enter by 'sending a communication'. This does not specifically allow for phone calls, but, they will not in any event count as a payment if made at a normal rate. The communications which can be sent must be ordinary letter post or some other form of sending a communication which is 'neither more expensive nor less convenient' than paying to participate. This could well be open to abuse.

The Act also says that the option of a no-purchase alternative must be clearly publicised, and this gives approval to Russell v Fulling (Times 23 June 1999). The Act also says, though, that, in the allocation of prizes, there must be no differentiation between those paying to enter and those not. What then of promotions offering just one major prize? It cannot be intended that each path to entry must guarantee the first prize, so it must be assumed that promoters must not be required to seed the promotion in advance so that one path to entry will be determined from the outset to be the winner.

The presence of skill

Section 14 applies only where winning depends wholly on chance. To avoid the simple avoidance technique of getting entrants to answer a ludicrously easy question, the Act provides that this will not be achieved if the skill or judgment required is such that it would not prevent 'a significant proportion' of entrants from getting the right answer. A 2004 UK survey found that a quarter of respondents did not know the century in which the First World War took place, while 53 per cent thought that Nelson commanded at Waterloo. It could well turn out that, despite what might have been intended, even the less taxing questions might turn out to have just the right degree of skill.

In truth, an opportunity has been missed. In Spain and Portugal, running such promotions depends on registration and payments to charity '“ an easier and more fruitful approach.