Prize competitions have long been used by businesses to engage consumers and promote their products and services. In recent years there has been a noticeable increase in dedicated prize competition businesses, offering consumers the chance to win houses, cars, cash and other substantial prizes.
The size and popularity of these competitions are now attracting attention from both the Government and regulators.
Prize competitions in the spotlight
In its white paper 'High stakes: gambling reform for the digital age', the 2022 to 2024 Rishi Sunak Conservative Government indicated that it would explore regulating the largest competitions to identify options and establish an evidence base to properly assess their impact and the proportionality of various options. Those options are likely to focus on player protection, transparency, and, where applicable, returns to good causes. In October 2024, the Gambling Commission stated that unlawful prize competitions have raised concerns across other Government departments, including HMRC and the National Crime Agency, and that it is introducing a new cease and desist process for illegal prize competitions (although how such process will differ from its existing cease and desist process is unclear).
In a speech given in December 2024, Baroness Twycross (the current Labour Minister for Gambling) acknowledged the voluntary action already taken by the prize competition sector to act transparently and to implement player protection measures. She also indicated that discussions between the Government and the prize competition sector will continue. Most recently, DCMS has also confirmed (in response to a written question in the House of Commons) that it has commissioned independent research looking at the size and nature of the prize competition market, as well as the possible harms associated with prize competitions, to inform its policy considerations.
The regulatory landscape of prize competitions
It is a common misconception that prize competitions are 'unregulated' because, provided they operate in accordance with the relevant provisions of the Gambling Act 2005, they are not required to hold a licence issued by the Gambling Commission. However, prize competition businesses are subject to various laws and regulations already intended to protect consumers and ensure transparency. For this reason, and with the addition of some appropriate self-regulatory measures (including those referred to below), statutory regulation that mirrors (or is a variation of) the requirements imposed on businesses offering facilities for 'gambling', should be unnecessary and may be avoidable. However, with the spotlight of Government and regulators firmly upon them, it is more important than ever for businesses that offer prize draws to continue to showcase their adherence to the current legal and regulatory framework and to take into account the shifting legal, regulatory and political landscape in which they operate and (if they have not already done so) consider adopting best practice in recognition of the numerous benefits of additional self-regulation. Below is a summary of the key aspects of the current legal and regulatory framework, including details of upcoming changes and suggestions of self-regulatory measures that promoters of prize competitions should consider adopting (if they do not already):
- Consumer protection: prize competition businesses must comply with all applicable consumer protection laws. This includes the Consumer Protection from Unfair Trading Regulations 2008 (CPUT) which lists a number of prohibited unfair commercial practices that are automatically 'unfair'. Such practices include (for example) advertising a prize competition but not awarding the prize described (or a reasonable equivalent), and falsely representing that an entrant could win a prize when in fact there is no prize (or the entrant would be required to pay in order to claim the prize).
From April 2025, CPUT will be repealed and replaced by Part 4 of the Digital Markets, Competition and Consumer Act (DMCCA). The DMCCA largely restates the provisions of CPUT with minor changes, and also introduces new prohibited practices, including 'drip pricing' and publishing fake reviews, as well as a new regime for subscription contracts (which will be in force from Spring 2026 onwards). Much stronger enforcement powers will also be granted to the Competition and Markets Authority (CMA). This will enable it to impose GDPR-style penalties (up to the higher level of 10% of the contravening business's global annual turnover or £300,000) without having to go to court first, along with other direct enforcement measures.
Consumer law already places significant obligations on promoters of prize competitions and ongoing compliance is essential to continued commercial success.
- Advertising codes: the UK code of Non-broadcast Advertising and Direct & Promotional Marketing (CAP Code) is the rule book for non-broadcast advertisements, sales promotions and direct marketing communications. The UK Code of Broadcast Advertising (BCAP Code) applies to all advertisements and programme sponsorship credits on radio and tv services licensed by Ofcom. Prize competition businesses are required to comply with these codes insofar as they are applicable to their advertising activities (including on social media).
The rules within the CAP Code applicable to 'promotional marketing' apply to text-to-win offers, instant-wins, competitions and prize draws and include (by way of example) requirements that:
T&Cs: all marketing communications or other material referring to promotions communicate all applicable significant conditions or information where the omission of such conditions or information is likely to mislead. Significant conditions or information may include how to participate, an explanation of the free entry route, start and closing dates, details of prizes, any geographical, personal or technical restrictions and the promoter's name and address.
Prompt and efficient award of prizes: organisers award the prizes as described in their marketing communications, or a reasonable equivalent, normally within 30 days of the closing date. Relevant ASA rulings upheld against prize draw (or similar) promoters indicate that what will be considered a 'reasonable equivalent' prize is a relatively high bar, and (for example) offering a cash alternative to an expensive item will not always suffice.
Charitable contributions: if the promoter claims that participation in a prize competition will benefit a registered charity or cause, they must (amongst other things) name each charity/cause (or if it is not a registered charity, define its nature and objectives), and specify exactly what will be gained by the named charity/cause and how the contribution will be calculated. The benefit to the charity/cause must not be exaggerated and, if asked, they must be able to a) make available to consumers a current or final total of contributions made and b) be able to show the ASA or CAP the formal agreement with those benefiting from the promotion. These requirements reflect, in part, the additional obligations on 'commercial participators' under the Charities Act 1992 and the Fundraising Regulations. In summary, commercial participators are required to enter into a written commercial participation agreement (CPA) with the relevant charity(ies) that meets the applicable legal requirements; make the required disclosures (known as "solicitation statements") when promoting draws based on contributions to charity(ies); monitor their activities and the conduct of employees; report and make records available to the relevant charity(ies) in accordance with the CPA; safeguard money or property acquired for the benefit of the charity(ies); and make the requisite payments to the charity(ies) within the required timeframes. For these purposes, a 'commercial participator' would include a prize draw operator who promotes their draws on the basis that they will make contributions to one or more specified charities. Alternatively, if as part of a promotional venture, it is represented that charitable contributions are to be applied for charitable, benevolent or philanthropic purposes, rather than for the benefit of one or more specific charity(ies), the prize draw operator may be what we refer to as a 'non-commercial participator' which gives rise to similar (albeit slightly less onerous legal and regulatory obligations). Failing to comply with the applicable requirements can be a criminal offence punishable by a fine. If your prize competition business makes any public statements about charitable donations, it is important to determine if it meets the definition of a commercial participator or if it is a 'non-commercial participator' pursuant to regulation 7 of the Charitable Institutions (Fund-Raising) Regulations 1994 (or indeed neither of these). This will help determine the extent of any obligations arising under the Charities Act and the Fundraising Regulations, and whether registration with the Fundraising Regulator (and adherence to the standards set out in the Code of Fundraising Practice) is necessary or advisable. The Fundraising Regulator regulates all fundraising in England, Wales and Northern Ireland carried out by charitable institutions and third-party fundraisers. Its role includes investigating fundraising practices that have caused significant public concern and investigating complaints from the public about fundraising practice, where these cannot be resolved by the charities themselves. While the Fundraising Regulator does not have statutory power, it publishes summaries of its investigations on its website and on social media, which in turn could present reputational considerations.
While the ASA has limited powers of enforcement, it can (and frequently does) make public rulings about businesses who have breached the codes. Serious or widespread breaches (for example, those which are identified across a specific sector) may also be referred to Trading Standards or the CMA. CAP and BCAP have also recently published a consultation on proposed amendments to the codes to reflect the changes to consumer law outlined in the DMCCA. You can read more about this consultation in our article here.
Prize competition businesses should ensure that all relevant staff, or third parties who provide advertising/marketing services to the business, receive adequate training to understand the requirements under the codes applicable to their business, including any updates that are made in due course following the consultation.
- Data protection: businesses running prize competitions must handle personal data correctly and comply with the requirements under the UK General Data Protection Regulation, the Data Protection Act 2018 and the Privacy and Electronic Communications Regulations and adopt appropriate cookie and privacy notices. It is also worth noting that in October 2024, the Government introduced a Data (Use and Access) Bill (DUA Bill) into Parliament. This may result in changes to data subject access request (DSAR) rights and obligations, privacy notice requirements, rules and penalties in the area of cookies and electronic marketing, and the way the Information Commissioner functions. You can read more about the DUA Bill in our article here.
- Self-regulation: a number of prize competition businesses have implemented player protection measures that go above and beyond existing legal and regulatory requirements. These include the implementation of spending caps, offering players the ability to set their own spending limits or to exclude themselves from the website, publishing 'responsible play' policies on their websites and signposting resources if consumers are concerned about their participation in the draws. These examples of best practice have numerous benefits and are indicative of a commitment by the sector to operate responsibly.
Any prize competition businesses that do not already adopt best practice, or whose compliance framework may be less developed, would be well-advised to conduct a compliance review. This would help identify and remedy any apparent shortcomings, review their terms and conditions to ensure compliance with all applicable laws and regulations, and consider adopting all or some of the self-regulatory practices outlined above (or equivalent measures).
If you are running a prize competition and require support to conduct a compliance review or ensure ongoing compliance with applicable laws and regulations and any upcoming changes, our experienced team is happy to help. We can assist in preparing or updating terms and conditions or policies and procedures, delivering training to staff, and implementing best practices. Our specialist charity law experts are also well-placed to advise on navigating charity law requirements, including ensuring that the terms of a CPA are compliant with applicable laws and regulations, and understanding the requirements of the Fundraising Regulator.