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Take a chance on me

Marketers must take account of legal changes to the running of prize promotions that take effect from September 1 2007, advises Ardi Kolah.

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According to Philip Circus, director of legal affairs at the Institute of Sales Promotion, it's no exaggeration to say that we are experiencing the most significant change to the legal framework affecting promotional marketing for the last 30 years. The main reason for the upheaval is the enactment of the Gambling Act 2005 which comes into effect on September 1.

The government recognised that free entry to promotional games of chance without being linked to the purchase of goods and services was a device used by many brand owners in order to avoid the trap of running an illegal lottery.

But the practice of stating on pack "no purchase required" was of dubious legal basis in order to ensure compliance with the law. And it's fair to say that the public never really understood why chances were given to non-purchasers.

As a result, the government undertook a comprehensive review of gambling legislation and the result of its labours was the Gambling Act 2005, where prize promotions is just one element of the new legislation.

From September 1, the whole framework around prize promotions changes but it's still a legal minefield for most marketers new to this area of marketing practice.

Thankfully help is at hand as a new book, written in simple to understand and jargon-free English has just been published.

'Sales Promotion and Direct Marketing Law: A Practical Guide' by Philip Circus* is the most up-to-date and comprehensive statement on this whole area of marketing practice. Given that ignorance of the law is something that can't protect us when the shit hits the fan, I strongly recommend you go out and grab a copy of this book before it's too late.

The good news is that unless the price of the goods or service has been inflated on account of your brilliantly creative prize promotion, then any promotional game of chance or combination of skill and chance is legal without the need for you to offer the free entry route of "no purchase required" that you may have done in the past.

Therefore, provided the price of a product isn't increased on account of the promotion, it won't amount to an illegal lottery.

Circus observes: "It would be no exaggeration to say this is the most profound change to the regulatory framework affecting promotional marketing ever. Certainly by effectively allowing lotteries in sales promotion it will have major consequences for business.

"Most importantly it means the end of the necessity for free entry routes in relation to on-pack games of chance such as instant wins. This change is further likely to diminish the use of skill competitions in the industry, particularly since, as a rule, games of chance can be easier to administer and bring a greater response."

So that's sorted then.

Or is it?

Well, in my experience there's always some legal caveat lurking in the background to general principles of marketing law** and it appears that ordinary postage or telephone costs associated with the prize promotion won't count as having inflated the price of the good or service unless it's a premium rate phone number that the punter needs to call use in order to take part -- in which case you might want to think about revising the promotion.

Anyway, premium rate phone numbers have got themselves such a bad name of late that I'd avoid using them for now rather than run the risk of falling foul of the Act.

In extreme cases, a prize promotion might amount to gambling. But for this to occur, the prize promotion would've had to cross the line between passive participation and proactive game play.

So if you like using scratch cards in your prize promotions you should be OK for now.

A more thorny legal marketing issue is when is a prize promotion considered to amount to a lottery and therefore illegal?

Section 14(5) of the Gambling Act 2005 provides "a process which requires persons to exercise skill or judgement or to display knowledge shall be treated for the purposes of this section as relying wholly on chance if:
(a) the requirement cannot reasonably be expected to prevent a significant proportion of persons who participate in the arrangement of which the process forms part from receiving the prize, and;
(b) the requirement cannot reasonably be expected to prevent a significant proportion of persons who wish to participate in that arrangement from doing so."

Eh? On page 45, less the gobbledygook. the answer to this question is:

"It means that what is supposedly a game of skill will be regarded as a game of chance if the skill required cannot reasonably be expected to prevent a significant proportion of participants from winning a prize or from wishing to participate. How this will be interpreted in practice remains to be seen. Much will depend on the practical enforcement approach of the Gambling Commission and any case law."

The book also covers self regulatory controls, laws on price claims, IP issues, running promotions across the EU and data protection issues.

It may be OK to invite your customers to take a chance on you, but it's not worth gambling with the law.

Ardi Kolah is leading brand marketing and sponsorship practitioner and author of Essential Law for Marketers. He can be contacted at ardi.kolah@ogilvy.com or 0207 479 0706.

* Available from Tottel Publishing, price £65.00

** See Essential Law for Marketers by A Kolah, published by Butterworth Heinemann, price £30.00

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