The paid-for prize draw trend

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The ASA recently upheld a complaint against a company running a paid-for prize draw, and I’ll come on to the specifics of that, but I was particularly interested in this ruling, because it reflects a trend for paid-for prize draws, which I’ve detected over the last few months.

Prizeology is approached at least a couple of times a week by people who want help running paid-for prize draws. In essence, in a paid-for prize draw punters pay to enter the draw and the promoter makes a profit because the proceeds – the total takings from entries – add up to more than the original cost of the prize.

It’s the property raffle model really, which I’ve written about before, but making a profit rather than a loss is tied to the number of tickets sold, which is why the terms and conditions of paid-for prize draw usually have careful caveats about what happens if ticket sales don’t reach a certain level.

It’s not illegal to ask punters to pay to enter a prize draw if the entry rate is not inflated, but paid-for prize draws are an inflated rate of entry and therefore  become a lottery for which a licence is required. Lotteries are regulated by the Gambling Commission under the 2005 Gambling Act and cannot be run for personal or commercial gain. Paid-for prize draw promoters get around this by offering a free entry route as well, which brings me back to the ASA ruling.

The ruling I’m talking about was on a complaint against a company called Hydro Solutions Fylde. It’s not exactly a glamorous-sounding name, but it trades as Elite Competitions describes itself as “the Internet’s most interactive prize competition company” and it runs paid-for prize draws. The complaint was about two draws, both of which had cars as prizes. In one there were 1250 tickets available at a cost of £30 each. In the other there were 475 tickets available at a cost of £11 each.

The ASA found that the ads had breached rule 8.17 of the CAP Code, which states: “All marketing communications or other material referring to promotions must communicate all applicable significant conditions or information where the omission of such conditions or information is likely to mislead.” More specifically, the ads had also breached rule 8.17.2, which says: “Any free-entry route should be explained clearly and prominently.”

So the Elite Competitions website, where the draws were running, did apparently say “See below for free entry method” near the top of the page and further down the page potential entrants were referred to the terms and conditions for details of the free entry method. However, it seems clear to me that the CAP Code was breached.

I’m absolutely not saying this was the case here and I’m sure Elite believed they had complied with the CAP Code, but as a general point, in a paid-for prize draw it’s not really in the promoter’s interest to publicise a free entry method as it potentially undermines the number of paid entries and therefore the profits.

After the ASA’s ruling had been published, I took a look at the Elite Competitions website and was interested to see that it was still running paid-for prize draws and still publicising the free entry method in the same way. I must say finding the terms and conditions wasn’t easy, but I eventually spotted them they’re right at the bottom of the page, beside the copyright notice.

At Prizeology we pride ourselves on our easy-to-read and succinct terms and conditions. Elite’s terms and conditions run to well over six thousand words and there are 23 points, some with multiple sub-points, but paid-for prize draws are quite complicated. Free entry is largely dealt with in point 16 and I know this because – little tip for you here – I did an on-page search for “free”. In case you do want to enter, it’s entries on a postcard and postal entries are limited to one entry to each competition per postcard.

Anyway, as I say, I’ve definitely noticed a rise in the number of people who believe they can turn a profit with a paid-for prize draw, but what I haven’t yet seen is a parallel rise in the number of people who want to enter a paid-for prize draw. The prizes may seem attractive and the odds might look pretty good, but I’m tempted to say that, from my perspective, this type of prize draw doesn’t really stack up.

Sarah Burns is Prizeology’s Chief Prizeologist.

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