UK government plans to revamp holiday pay calculation for part-year workers
Out-Law Guide | 24 Feb 2023 | 4:20 pm | 8 min. read
However, promoters must be mindful of applicable UK regulatory controls when planning and running these competitions.
The 2005 Gambling Act is the key piece of gambling legislation in Great Britain.
The Gambling Act defines and differentiates lotteries, betting (which can include certain prize competitions) and gaming (that is playing a game of chance for a prize).
Skill competitions and free prize draws fall outside the scope of the Gambling Act, provided they do not fall inadvertently within the definition of a lottery, betting or gaming due to their structure.
Under the Gambling Act, a competition will not be a lottery if it either:
For the skill test to be met, the promoter must have a reasonable expectation that the skill, judgment or knowledge required to enter the competition will either:
If the competition satisfies this test, it will be outside the scope of the Gambling Act’s regulatory controls. An example of this might be a crossword where entrants are required to solve a number of clues and only fully completed entries are submitted.
If there are multiple stages to a competition, the key is whether the first round satisfies the skill test. If those who fully complete the crossword in our example correctly are entered into a prize draw, this will still qualify as a skill competition, not a lottery. This is because the first stage - completing the puzzle - satisfied the skill requirement.
If questions are too easy and therefore do not deter a significant proportion of potential participants, or eliminate a significant proportion of entrants, the skill requirement will not be satisfied. A question such as "what is the capital of France?" is too easy. The Gambling Commission has not indicated what constitutes a "significant proportion", beyond saying that the phrase must be given "its ordinary, natural meaning".
Where a competition has been run by way of multiple choice questions, the Gambling Commission has said that it will not take action where there are sufficient plausible alternative answers, and the correct answer is not obviously given close to the question. The level of skill or knowledge required will vary, depending on the target audience.
If a competition does not meet the skill requirement, it will be considered a lottery unless either:
The Gambling Act states that "payment" includes paying money (or money's worth), as well as paying more for something to reflect the opportunity to enter the competition. For example, someone who buys a packet of crisps which directs buyers to a website competition will be treated as paying to enter that competition if that crisp packet costs more than an equivalent non-promotional packet. However, if promotional and non-promotional packets cost the same, there will be no payment. The Gambling Act also says that paying at "normal rate" for posting a letter (first or second class, without special delivery arrangements), making a telephone call or using any other method of communication does not amount to "payment". However, a call or a text message to a premium rate telephone number will involve payment.
There is no reference to emails or social media in the legislation or Gambling Commission guidance, but the same principles will apply.
Even if there is a paid route to enter, a competition will be treated as free to enter if there is an alternative free entry route, provided that:
Conviction, fines and imprisonment are a worst-case scenario, but the negative publicity and reputational damage which could arise from running a competition found to be an illegal lottery could be significant
It is a criminal offence to run a lottery unless either you have a lottery operating licence, or the lottery is exempt from the licensing requirement because it is a private lottery (e.g. a workplace lottery); a customer lottery; an incidental non-commercial lottery; or a small society lottery. In each case, the exempt lottery must fulfil certain conditions set out in the Gambling Act.
Small society lotteries - that is, lotteries below certain financial thresholds which are operated by non-commercial societies - must still be registered with the local licensing authority.
Lottery operating licences are only available to local authorities or non-commercial societies, or external lottery managers managing lotteries on their behalf. A commercial organisation cannot get a lottery operating licence for its own promotional purposes.
Any individual or company involved in promoting or managing an illegal lottery, including a competition which is a lottery, is guilty of a criminal offence under the Gambling Act, and on conviction is liable to a fine of up to £5,000 and imprisonment for up to 51 weeks (England and Wales) or six months (Scotland).
Conviction, fines and imprisonment are a worst-case scenario, but the negative publicity and reputational damage which could arise from running a competition found to be an illegal lottery could be significant.
A competition which involves guessing the outcome of a race or other event, or the likelihood of something occurring or not, or whether something is true or not, will be betting if payment is required to enter that competition. It does not matter whether the race (or other event) has already occurred, or whether or not one party knows the outcome. Guessing includes predicting, using skill or judgment. A betting operating licence will be required to run such a competition.
As explained above, the Gambling Act provides that paying the normal price for something does not amount to payment to participate in a competition. So where a guessing competition can be entered by buying a promotional product at its normal price, there will be no betting.
In addition to ensuring that a promotion does not fall foul of the Gambling Act, 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. This must also be complied with when running prize promotions.
In addition to the general principles that advertising must be legal, decent, honest and truthful, the CAP Code requires that certain information be given to consumers before or at the time of entry into the prize promotion:
Participants must be able to retain this information or have easy access to it throughout the promotion, which can be through the terms and conditions of the prize promotion. The information must be clear for participants.
Until recently, the rules applying to Northern Ireland were different to the remainder of the UK. It was not permissible to run a promotion where the consumer was required to pay any money whatsoever - for example, requiring a consumer to buy a packet of crisps to enter the prize draw - a genuine, no-purchase route to entry had to be provided.
This meant that UK promoters were required to consider whether to exclude Northern Ireland from promotions altogether, run a free-entry route in Northern Ireland or run a free-entry route for the whole of the UK.
The 2022 Betting, Gaming, Lotteries and Amusements (Amendment) Act (Northern Ireland) amended the previous rules in Northern Ireland that were inconsistent with those in England, Wales and Scotland with effect from 27 April 2022. This aligned the rules on entering prize draws across the UK, benefitting those considering UK-wide promotion.
UK government plans to revamp holiday pay calculation for part-year workers