Promotions and giveaways can be powerful marketing tools for audience growth and brand engagement. In the UK, a promotion that is based purely on chance and requires payment to enter may be treated as a form of gambling under the Gambling Act 2005.
Whether you are offering a luxury weekend away for newsletter sign-ups or a giveaway promoted by an influencer, creative campaigns can raise issues around gambling laws, advertising rules and data protection if they are not structured properly.
Our commercial law solicitors help businesses run engaging, compliant, and brand-safe promotions, from correctly structuring prize competitions to advising on GDPR and influencer agreements.
Contents:
- Legal guide to running a prize competition
- What is the difference between a prize competition, a prize draw and a lottery?
- What are the key legal considerations in running a competition/prize giveaway?
- How do you make sure that your competition is free to enter?
- What other legal considerations are involved with running a competition?
- Can we change the closing date, prize, or rules after launch?
- Do we need to name or publish the winner of a competition or prize?
- What records should we keep in case of a complaint or investigation?
- Considerations when using an influencer to promote your prize giveaway
- Get support with your competition or influencer campaigns
Legal guide to running a prize competition
Promotions and giveaways can be powerful marketing tools for audience growth and brand engagement. In the UK, a promotion that is based purely on chance and requires payment to enter may be treated as a form of gambling under the Gambling Act 2005.
Whether you are offering a luxury weekend away for newsletter sign-ups or a giveaway promoted by an influencer, creative campaigns can raise issues around gambling laws, advertising rules and data protection if they are not structured properly.
Our commercial law solicitors help businesses run engaging, compliant, and brand-safe promotions, from correctly structuring prize competitions to advising on GDPR and influencer agreements.
What is the difference between a prize competition, a prize draw and a lottery?
The difference is important because it affects whether your promotion can be run lawfully without a gambling licence.
- A prize competition involves skill, knowledge or judgement, and that element must be real rather than superficial.
- A prize draw is based on chance, with the winner selected at random.
- A lottery also involves chance, but usually includes payment to enter, which can bring it within gambling regulation.
For businesses, the key issue is getting the structure right from the start, especially where people pay to enter or the skill question is minimal.
What are the key legal considerations in running a competition/prize giveaway?
The Gambling Act 2005 is the main legislation governing gambling in Britain. It applies to lotteries, betting (which can include certain prize competitions) and gaming (namely, playing a game of chance for a prize).
The Gambling Act requires you to have operating licences in place if your competition falls within the definition of a lottery, betting or gaming. Failure to have such a licence can result in fines, potential imprisonment and significant brand and reputation damage.
Importantly, skill competitions and free prize draws will fall outside the scope of the Gambling Act if they either:
• satisfy the ‘skill’ test; or
• if no payment is required to enter.
How do you structure a competition to satisfy the ‘skill’ test?
For the skill test to be met, you must have a reasonable expectation that the skill, judgment or knowledge required to enter the competition will either:
• deter a significant proportion of potential participants from entering; or
• prevent a significant proportion of entrants from receiving a prize.
The level of skill or knowledge required will vary, depending on the target market.
If questions are too easy and do not deter a significant proportion of potential participants, or eliminate a significant proportion of entrants, the skill test will not be satisfied. You must either increase the skill level of the test (keeping records of why you believe the skill test is met) or ensure that the competition is free to enter.
How do you make sure that your competition is free to enter?
If a competition fails the skill test, it can still fall outside the remit of the Gambling Act if either:
• no payment is required to participate in the competition (including finding out if you have won or to collect a prize); or
• there is an alternative free entry route.
The Gambling Act states that ‘payment’ includes paying money (or money's worth), as well as paying more for something in order to enter the competition, which captures calls to premium rate telephone numbers and paying more for a promotional product versus a non-promotional product.
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:
• the alternative route is a letter sent by ordinary post or some other communication method which does not involve payment and is no less convenient than the paid-for route;
• the choice is publicised in a way that is likely to come to the attention of all those intending to participate; and
• the system for allocating prizes does not discriminate between the two entry routes.
If you are not sure that your competition satisfies the skills test, you can ensure that it falls outside the scope of the Gambling Act by making it free to enter or if you do require payment, by having an alternative and well-publicised free entry route.
What other legal considerations are involved with running a competition?
The UK Code of Non-broadcast Advertising and Direct & Promotional Marketing applies to non-broadcast advertisements, sales promotions and direct marketing communications and must be complied with when running prize promotions.
The CAP Code generally requires advertising to be legal, decent, honest and truthful. In addition, it requires certain practical information to be clearly given to consumers before or at the time of entry into prize promotions. This information includes things such as the start and closing dates of the competition, details of how to participate, how winners will be notified and results announced.
You will collect personal data through competitions and prize giveaways, and you must comply with the relevant data protection regulations in doing so. You may wish to use that personal data for direct marketing through, for example, regular newsletters and other customer incentives, which can be an additional benefit of running a competition. Legal advice should be sought into what, if any, additional consent requirements are needed when running the competition, in order to be able to use the data collected for direct marketing purposes.
Can we change the closing date, prize, or rules after launch?
Once a competition has launched, changing the closing date, prize or rules can create legal risk and undermine fairness. UK advertising rules expect promotions to be run as advertised, and mid-campaign changes are likely to be difficult to justify unless something genuinely unexpected happens outside your control. Even then, any change should be limited, clearly communicated and consistent with the original terms. If you promoted a particular prize, you should normally provide that prize or a reasonable equivalent. In practice, it is far safer to finalise the mechanics and terms before launch than rely on a general right to amend later.
Do we need to name or publish the winner of a competition or prize?
Promoters are generally expected to publish or make available enough information to show that a genuine award took place, often including the winner’s surname and county for major prizes. That does not mean publishing full personal details, but it does mean being transparent about how winner information will be handled. Your terms and privacy wording should explain this clearly. Entrants should also have the opportunity to object to wider publication or ask for limited disclosure, while recognising that details may still need to be provided to a regulator if required.
What records should we keep in case of a complaint or investigation?
You should keep a clear paper trail from launch through to prize fulfilment. That usually includes the final terms and conditions, promotional materials, entry records, evidence of eligibility checks, the method used to select the winner, correspondence with the winner, and proof that the prize was awarded. If you collected personal data for marketing, keep records of the wording used and any consents obtained. Good record keeping matters because if a complaint is made, you may need to show exactly how the promotion was run and why it was fair.
Considerations when using an influencer to promote your prize giveaway
Many businesses extend the reach of competitions or prize giveaways by engaging influencers to promote them on social media. The regulatory framework remains the same. The Gambling Act and CAP Code apply equally to promotions conducted on social media.
When working with an influencer, it is a good idea to have a written marketing agreement in place. Such an agreement helps protect your brand, sets clear expectations for product promotions and competitions, and requires the influencer to comply with all the legal and regulatory requirements outlined above.
Get support with your competition or influencer campaigns
Prize promotions are a powerful way to engage customers and grow your audience, but only if they are legally compliant and properly structured. Our commercial law solicitors can advise on every stage of your campaign, from drafting competition terms and reviewing free entry routes to putting effective influencer agreements in place. With extensive experience advising consumer-facing businesses, we help ensure your promotion delivers results without exposing you to regulatory risk.
