When some prizes are more equal than others

The Gambling Act 2005, in which the provisions of the Lotteries and Amusements Act 1976 regarding promotions with prizes are completely replaced, came into force on the 1 September. The changes mean that a definition of 'prize' has been provided for the first time, though its scope is unclear, and the notion of free entry may also have been inadvertently widened.

Two Acts compared

Section 1 of the Lotteries and Amusements Act, 1976, declared that all lotteries were illegal, but providing no definition of a 'lottery'. In fact, this statutory omission had long been made good by decisions such as Taylor v Smetten (1883) 11 QBD 207, where it was defined as a 'distribution of prizes by lot or chance'. This was approved by the House of Lords in Imperial Tobacco Ltd v Attorney General [1980] 1 All ER 866.

As for 'prize', this received no statutory definition, but, in DPP v Bradfute [1967] 2 QB 291, it was said that a 'prize need not be a some of money; it can of course be an article, a commodity, and. . . anything which can be sold, or indeed anything which can be said to be of value' (at p296 per Lord Parker).

Although this definition was proffered in the context of s1, it can properly be assumed that it applied also in relation to s14 of the Act which imposed restrictions on 'prize competitions' but without defining a 'prize'.

This Act has followed the model of the 1976 Act in that it deals separately with prize competitions (ss9 and 11), and lotteries (s14). The precise nature of the controls imposed in relation to each is not the subject of immediate discussion, but what is must be the first statutory definition in this context of 'prize'.

Sections 11(4) and 14(4) define a prize as 'including any money, articles or services'. This definition prompts the question: does this mean that accommodation and facilities are not prizes within the definition? Section 14 of the Trade Descriptions Act 1968, clearly recognised this point since it refers specifically to services, facilities and accommodation as falling within the ban on false or misleading statements. Section 20 of the Consumer Protection Act 1987 makes exactly the same specific references.

Does this therefore mean that the Gambling Act has excluded facilities and accommodation from the definition of 'prize'? It will of course be pointed out that the definitions in this Act say that it 'includes' those items which are then listed, and that therefore facilities and accommodation are still potentially within its scope.

Facilities not 'prizes'

Against this is the argument that had facilities and accommodation been meant to be within the Act, they could have been specifically included, as they are in the 1964 and 1987 Acts.

Furthermore, ss11 and 14 go on to say that the definition of 'prize' (that is, money, articles or services') applies whether or not the prize consists wholly or partly of money, services or articles provided by members of the class among whom the prize is to be distributed. Since this refers only to money, services or articles, and contains no reference to 'such other item as could be regarded as a prize', it becomes increasingly difficult to see how the definition of 'prize' could ever be read as extending to facilities or accommodation.

It is in fact likely that the definition of 'prize' was defined as it was to recognise the issues raised in DPP v Bradfute. There, labels on tins of cat food invited purchasers to see if the numbers provided could be struck off against the facsimile of a bingo card which was also provided. Those who succeeded then had to answer a question of skill to win a prize. The court ruled that getting to stage two (the test of skill) was itself a prize and hence the promotion was an illegal distribution of prizes by chance.

If this line of argument is correct, it now seems to be the case that a prize competition or lottery in which the prize is accommodation (perhaps a house), or a facility (perhaps a flight and a hotel stay) falls outside the Act and are subject to no legal restrictions at all.

Payment to participate

In a wholly new feature, the 2005 Act defines, in Schs 1 and 2 what is meant by paying to participate in a prize promotion or a lottery. This derives from the fact that an offence can only arise under ss11 and 14 if persons are required to pay. The Schedules state, in identical terms, that there will be deemed to be a requirement to pay when a person has to pay 'in order to take possession of a prize'.The use of the specific phrase 'take possession' very strongly suggest that the provision can apply only when the prize is a physical thing, such as a car. The phrase is wholly inapt where the prize is a service or a facility, such as a flight or a stay in a hotel. It could no doubt apply to a house, where winning it is the prize, but real property anyway falls outside the definition of a prize (which as noted above is limited to services, money and articles). Accordingly, if a winner has to meet the costs of going to pick up the car he has won, that is a requirement to pay, and puts the whole promotion in jeopardy; whereas the winner of a weekend in London, who has to travel to the hotel, is not paying.

No purchase route

Section 1 of the 1976 Act had provided that all lotteries were illegal. In Reader's Digest v Williams [1976] 3 All ER 737. The court ruled that no offence would be committed if, even though an entry could be made via purchase, entrants were also offered a no purchase route. Lord Widgery said that an offence would arise only if 'the participants, or a substantial number' of them, paid to take part. No definition was given of 'substantial', nor has this precise point ever arisen for decision.

It was always an odd requirement since it meant that no one could know in advance if a promotion were legal or not, since no one could know in advance if a substantial number of persons would choose to ignore the no purchase option.

Furthermore, why should those who did use the free entry route be tarnished when a substantial number did not? If the promotion were illegal, then a winner from among those who had not paid would be unable to claim his prize.

The 2005 Act, perhaps unintentionally, has avoided this problem. It states merely that no promotion involves a requirement to pay if each participant is offered the alternative of entering via a communication (such as by post); so long as this option is clearly publicised; and so long as there is no discrimination between those who enter by purchase and those who take this alternative route.

There is no reference at all as to whether the number of participants who enter via purchase must be substantial for the alternative to be rendered void. If this is not to be relevant, then a considerable area of uncertainty in relation to the old law has been removed; but, as noted above, this has been replaced by much uncertainty as to the operation of the new law.