OFT takes prize draw companies to court over scratchcards

Out-Law News | 19 Jan 2010 | 9:13 am | 1 min. read

Consumer regulator the Office of Fair Trading (OFT) is taking five prize draw companies to court over competitions that it believes are unfair to consumers. It has asked the High Court for an injunction to stop the competitions taking place.

The companies operate competitions based on scratch cards which are posted to recipients or included with newspapers and magazines. The competitions involve the use of premium rate phone lines.

The action is being taken under the Enterprise Act, alleging breaches of the Consumer Protection from Unfair Trading Regulations.

The companies involved are Purely Creative Limited; Strike Lucky Games Limited; McIntyre & Dodd Marketing Limited; The Winners Club Limited; and Dodd Marketing Limited.

The action is also being taken against Adrian John Williams, a director of all the companies, and Wendy Elaine Ruck, the secretary of all the companies. The OFT is also taking action against Purely Creative director Catherine Cummings and previous Winners Club director Peter Jude Henry.

The companies maintain that their competitions are legal and so the OFT has asked the High Court to issue an order preventing the distribution of scratch cards that it believes are misleading.

The OFT claims that the competitions suggest that a person has won a prize when that prize can only be claimed by paying the company money. This is done either through a premium-rate phone line or through charges for insurance and delivery.

It said that the competitions deceive consumers by making them think that they are one of only a few prize winners, and that they mislead consumers regarding the value of their prize.

An OFT statement said that it also claims that the prize draws "omit information, or provide ambiguous information, about the chances of winning, costs of claiming, and terms and conditions of the prize draw".

OFT senior director Heather Clayton said: "our case is that these promotions encourage people to believe they have won a valuable prize when, we argue, the plain fact of the matter is that people are being sold a low value product".

"We have been unable to reach agreement with the companies or secure voluntary agreement that distribution will cease. So we think the best thing now is for the High Court to decide the matter," she said.

The Regulations, which came into force in May 2008, impose on businesses a general duty not to treat consumers unfairly. They prohibit misleading consumers by action or omission and also contain prohibitions against aggressive practices, as well as 31 specific practices that are always considered unfair.