Out-Law / Your Daily Need-To-Know

Controversial house competition closes successfully

Out-Law News | 16 Sep 2008 | 5:36 pm | 4 min. read

A controversial online competition to win a house in Devon has successfully stopped taking entries, having generated £1.15 million. The winner of the house has not yet been selected.

The Gambling Commission has said that such competitions do not fall within its remit, despite one gambling law expert telling OUT-LAW.COM that the competition is likely to be an illegal lottery.

The operators of the competition and their lawyers claim that it is a legal prize competition and not an illegal lottery.

The Wilshaw family was unable to sell its house and started an online competition in which 46,000 tickets were sold for £25 each, one of which would win the house.

The competition has reached its target of 46,000 sold tickets. The competition website now reads: "The competition is now closed. A huge thank you to all who took part. The ongoing process of sending out entry numbers will continue for those not yet in receipt of them". The part of the website which counted the number of tickets sold now reads '46,000'.

Antoinette Jucker is a gambling law expert with Pinsent Masons, the law firm behind OUT-LAW.COM. She believes that the competition is in fact an illegal lottery.

"I think this is an illegal lottery. The Gambling Commission should take an interest in this," she said. "If they don't do anything, others will do the same thing, raffling houses or cars or anything else that they're struggling to sell."

Jucker said that the completion of the Wilshaws' competition will encourage many others to run their own competitions.

"I think this will result in more competitions. The terms and conditions are there on the website, there is a template there and there isn't a huge amount needed to set a competition up," she said.

The operation of a lottery is illegal without a licence. Licences are not given unless the lottery is in aid of a good cause, and they cannot be run for private profit, nor can they offer a prize as valuable as the Wilshaws'.

Prize competitions can be run for private profit, but to qualify, a prize competition must involve the exercise of skill or judgment to a degree that would put off many people from entering in the first place and would disqualify most of those who did enter.

The Wilshaws asked a question about the price of a fishing permit which would have been hard for most people to answer on their own but was very easy to answer with the use of basic internet search tools. Anyone entering the wrong answer on the website was told to try again. No money was taken until the correct answer was submitted.

The Gambling Commission regulates lotteries and has the power to prosecute anyone it believes is operating an illegal lottery or raffle. It has published guidance to the Gambling Act which the Wilshaws are relying on to demonstrate that their competition is legal.

Steve Kuncewicz, a solicitor with law firm Ralli who is acting for the Wilshaws, told OUT-LAW.COM that the area is one of little legal certainty and that the following passage in the Commission's guidance (8-page / 86KB PDF) makes their competition legal:

"The Commission does not think a particular question or clue fails to qualify as involving skill or knowledge just because the answer can be discovered by basic research, whether on the internet or elsewhere".

Jucker disagrees, claiming that the kind of question used by the Wilshaws is not what legislators had in mind.

Jucker also said that the competitions would certainly appear to ticket buyers to be effectively a lottery, and that this perception was key to their willingness to pay £25 for a ticket.

"I think the perception of the public is that it is a lottery – they don't have to risk any money until they know they have the right answer. There is no doubt in my mind that the perception is that this is a raffle," she said.

The Gambling Commission has not publicly clarified whether or not questions which are easily answered by online searches can be said to involve skill or judgment. Despite having a remit to police illegal lotteries it told OUT-LAW.COM that it did not comment on individual cases and that anyone considering such a competition should consult the guidance.

"The guidance says that the Commission doesn't think that a particular question [that is answerable with online research] being chosen fails to qualify it as a competition. The flipside is that neither does it automatically qualify it," said a Commission spokesman.

He did say, though, that if in doubt the operator of a competition should apply the test in section 14(5) of the Gambling Act. "Where it is not self evident that there is sufficient skill, judgment or knowledge required, the test that should be applied is the one in 14(5) of the Act," he said.

"This question falls foul of section 14(5) [of the Gambling Act]," said Jucker. "It has two tests and this competition fails both of them. A significant proportion of entrants will 'win' and the question won't deter people from participating. The prize is being awarded wholly by chance because the overwhelming majority of entrants will get the answer right."

"How do you choose a winner when almost everyone gets the answer right? You take their name out of a hat. That makes it a game of chance, and therefore an illegal lottery," she said.

However, OUT-LAW.COM has seen correspondence from the Commission to a member of the public on the issue which appears to suggest that the Commission thinks such questions do qualify quizzes as prize competitions.

"It does not matter that the answer can be found from basic research on the internet," the Commission's James Cook wrote in the correspondence. "If this was the case then it would rule out virtually every question and answer skill competition. It is clear that a person is not eligible to enter the draw without answering the question properly, which stops it being a lottery."

A number of similar competitions have sprung up in the wake of the publicity received by the Wilshaws' competition. At least five online competitions are live or being planned, including: www.winadevonmanor.co.uk, www.propertycompetition.com, www.winaludlowchapel.com, www.winmyhouse.info and www.winthecheltenhamhouse.com.