When you launch a prize draw or competition (whether this is on your website, via social media or by any other means), how much thought goes into the terms that apply or the laws governing these promotions? Do you check the finer details or are you focused more on the opportunity to increase sales or gain a greater marketing list by your latest in-store promotion? The rules surrounding competitions can often be forgotten about, but a recent ruling by the UK's advertising watchdog reminds us how important they are.

The £5 castle

In April 2019, the Advertising Standards Agency (ASA) ruled that a competition billed as "win a castle for less than the price of a pizza" had been unfairly administered and was in breach of the UK Code of Non-broadcast Advertising and Direct & Promotional Marketing (CAP Code).

The promotor (a Mrs Susan DeVere) offered a Scottish castle as a prize in an online competition. Entries cost £5 per ticket, and the property was valued at between £1.5 and £2.7 million. However, when she did not sell enough tickets Mrs DeVere awarded the winners cash prizes instead. These were at the value of £65,000, £7,000 and £5,000.

One of the entrants complained, claiming that the competition had not been carried out fairly.

Mrs DeVere responded by claiming that she had made it clear that a lower cash prize would be offered if she did not receive enough entries, as set out in the terms and conditions on her website, and that all property competitions were run in this manner. The winner had also been offered a share of the castle and a chance to run a business there if they wanted to but they had chosen the cash alternative.

The decision

The ASA reached the decision that the competition had not been administered fairly because:

  • The CAP Code states that promoters must award the prize "as described" in their marketing communications, or "reasonable equivalents"
  • If a promoter is offering a cash prize alternative, they must make this clear on all marketing communications. Whilst the competition's terms and conditions referred to the lower cash prize alternative, this was not set out elsewhere and the ASA noted that the competition's Facebook page used the words "Win the whole building freehold" without any reference to a cash prize alternative. Mrs DeVere had also failed to make reference to the cash prize alternative in a prominent form in a number of other competition materials, including the competition website
  • People had entered the competition in the hope of winning a castle. Listing an alternative prize in the terms and conditions did not override the obligation to provide a "reasonable equivalent" (for example, the value of the property in cash). The prizes that were offered were not "reasonable equivalents" to the advertised prize.

Under the ASA ruling, Mrs DeVere must not run the competition again in its current form and must offer reasonable equivalents to the prizes she advertises, if she does not give away the advertised prize.

Competitions where entrants are having to make any sort of payment in return for entry run the risk of falling within the scope of a lottery (making them unlawful) rather than a prize draw. Mrs DeVere argued that she met the criteria for the latter, as there was a free method of entry (postcards) and participants did not have to pay for entries. However, she would also need to demonstrate that the entry question was sufficiently challenging to prevent a “significant proportion” of people from taking part or answering correctly if anyone was to challenge this point.

Tips to avoid a "Mrs DeVere" situation

The ASA's ruling offers a number of useful reminders that are as important to retailers as any other competition promoter. Remember that:

  • You are required to have terms and conditions in place for each competition. These should comply with the CAP Code. For example, they should clearly specify the prize(s) that will be awarded, along with any substitute prize(s). Make sure these are made available to potential entrants, whether this is via a link to a website page at the bottom of the advertisement or by providing a copy of these terms on the back of the marketing literature that advertises the promotion.
  • Any substitute prize must be a suitable alternative to the advertised prize (for example, awarding a hotel room for two for four nights is not reasonably equivalent to a prize described as a week in a luxury eight bed cottage).
  • You must communicate the fact that alternative prizes may be awarded in all of your marketing, such as Facebook pages, website pages and any advertisements, including verbal ones (eg via radio or interviews).
  • The terms and conditions governing your competition can land you in trouble even if you have set them out clearly and plainly. Even if Mrs DeVere had properly communicated the fact that she could award a lower cash alternative, and everyone entering the competition was therefore aware of this being an option, she would still have fallen foul of the CAP Code. You will therefore need to pay careful attention to each clause within your terms every time you prepare for a new competition.
  • Make sure your competition does not fall within the scope of a lottery, as discussed above. Consider whether there are free methods of entry, and whether any question(s) are challenging enough.

With time pressures and an enthusiastic marketing team it can be tempting to overlook or rush through the legal elements of a prize draw or competition, but terms and conditions have a huge impact on not only the operation but the reputation of your business. With consumers all too happy to boycott brands when they are found to be in breach of their marketing duties, make sure you promote your competitions in the right way.

This article is for general information only and reflects the position at the date of publication. It does not constitute legal advice.