A news item on 29 June reported on "fury" as property developers refused to hand over the keys to a luxury Kensington flat, valued at £2 million, because their ticket sales had raised only £227,000. The report reflects a recent trend towards using competitions or raffles to raise money, or to sell unusual properties. However, when you launch a competition, how much thought goes into the terms that apply or the laws governing these promotions? 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).
Mrs Susan DeVere offered a Scottish castle as a raffle 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 instead awarded the winners cash prizes. 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.
Responding to the complaint, Mrs DeVere argued that she had made it clear that a lower cash prize would be offered if she did not receive enough entries. This was set out in the terms and conditions on her website, and she claimed that all property competitions were run in this manner. She explained that the winner had been offered a share of the castle and a chance to run a business there if they wanted to. They had chosen the cash alternative.
The ASA decided 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 state this on all marketing communications
- The person who complained had entered into the competition in the hope of winning a castle. 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
- Whilst the competition's terms and conditions referred to the lower cash prize alternative, this was not made clear elsewhere and it did not override the obligation to provide a "reasonable equivalent" (for example, the value of the property in cash); and
- 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 such as this can 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 for those who run competitions. 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).
Any substitute prize must be a suitable alternative to the advertised prize (for example, any cash alternative should represent the value of the prize that had been offered).
Make sure you 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).
Finally, 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 may award a lower cash alternative, and everyone entering into 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.
With time pressures and an enthusiastic marketing team it can be tempting to overlook 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 (just ask Google). Make sure you promote your competitions in the right way.