How to operate prize competitions, free draws and promotions legally

I want to run a competition. How can I do this legally?

Participating in a competition to win a prize is not gambling unless it falls within the definition of “gaming”, “betting” or “participating in a lottery”. If you can avoid your competition falling into these legal definitions, you can run it without the need for a licence.

What makes a competition a lottery?

For an arrangement to fall within the definition of a lottery, participants must be required to pay to enter and the prize must be given away by chance (i.e. at random).

How can I avoid this?

There are two common ways to avoid this: (1) to incorporate a genuine and prominent free entry route (e.g. postal entry) or (2) to incorporate genuine skill, to prevent a significant proportion of people from winning or from participating. The rules relating to free entry and skill are complex and you should obtain specific legal advice about your proposal before proceeding.

I want to run a competition to win a house. Can I just sell tickets and pick out the winner?

No. If you sell tickets and pick out the winner of the house by chance (e.g. take the name of the winner out of a hat), this will be an unlawful lottery. You would risk being prosecuted and are likely to get the competition closed down by the Gambling Commission.

What about all these competitions with an easy question? Can I do the same?

Just because a competition exists with an easy multiple-choice question does not mean it is legal. You should not rely on other competitions as your benchmark for the level of skill required. Unless the process to select a winner involves significant skill, this is unlikely to be sufficient to render the competition lawful. Multiple-choice questions or those where the answer is blindingly obvious or easy to find on Google are likely to be unlawful, because insufficient skill is involved.

What level of skill is required for the competition to be legal?

The level of skill required is not legally defined, but the skill element must be sufficient to either prevent a significant proportion of those entering from winning a prize, or to prevent a significant proportion of those who wish to participate from doing so. “Significant proportion” is not defined in the Gambling Act 2005. Only the courts can rule on the interpretation of the legislation.

What about a free draw?

A lottery requires persons to pay to participate, so if there is a prominently advertised and genuine free entry route as an alternative to paying, the competition will be legal. The rules regarding free entry are complex so you should obtain legal advice before proceeding.

What about a product promotion?

If you are intending to give away a prize with a product, as long as you can show that the price of the product does not incorporate an amount charged to enter the competition, this will generally be legal. The rules regarding product promotion are complex so you should obtain legal advice before proceeding.

Any other things I should consider?

Yes, lots. But in particular when marketing your competition, you will have to comply with the Advertising Standards Authority CAP and BCAP Codes and you will also need to make sure that your terms and conditions are legally correct and compliant with these Codes. Your advertising must not be misleading, you should not extend competition closing dates and should always give away the prize offered and not an alternative of lesser value. Also bear in mind that the laws relating to competitions will be different outside Great Britain.

How do I find out more about the law relating to competitions?

The laws relating to competitions are complex with many pitfalls. You should always obtain detailed legal advice about your specific situation before proceeding. Please contact Richard Williams using the details below for further advice.