Everyone loves a freebie, so it’s no surprise that prize draws and giveaways are increasingly popular on social media platforms. Conducting a prize draw can improve customers’ engagement with your brand, boost your business’s profile, and help you to retain customers. Using social media influencers to promote your prize draw can also be a great way to reach new audiences and raise awareness. However, if you are running a prize draw, you need to make sure you comply with consumer law and advertising codes to treat entrants fairly and equitably.
The Advertising Standards Authority (ASA) recently upheld complaints against popular influencer Molly Mae Hague, for failing to provide appropriate evidence to show how the large number of entries to her social media prize draw would be collated and how the winner would be chosen randomly. Being seen to fall foul of the ASA like this can be detrimental to customer engagement and result in negative publicity for a brand and/or influencer.
This guide will help you to make sure prize draws run by you or your influencers follow the rules, creating a positive boost for your brand.
What is a prize draw?
A prize draw is a sales promotion or competition where a winner is chosen from a number of entrants (such as by random chance, by distributing pre-selected winning codes/numbers, or by ‘instant win’). The rules for ‘instant win’ prize draws are outside the scope of this guide but you can find ASA guidance here.
All sales promotions including prize draws and prize competitions (where a winner is chosen based on the skill of the entrants, such as the best original caption or piece of artwork) must comply with advertising codes, and the key rules to follow are set out below. It’s also very important to make sure you aren’t unintentionally running an illegal lottery! See below for how to avoid this.
What is an illegal lottery?
An illegal lottery is a lottery set up for private or commercial benefit (without a licence from the Gambling Commission) where the outcome depends on random chance.
A prize draw or competition could be considered an illegal lottery if you charge participants to enter (or to pay a higher price for goods in order to participate) and you select the winner at random.
A prize draw usually won’t be an illegal lottery if:
- there is an element of skill or judgment involved in taking part in your competition (meaning that significant amounts of people would be put off entering and/or would be prevented from winning);
- you are only charging a minimum unavoidable cost to enter (like minimum postage or text message costs); or
- you also have a ‘free entry’ route for non-paying participants to enter and not have their entries discriminated against.
Seek legal advice or contact the Gambling Commission if you are concerned that your prize draw might be an illegal lottery. For access to a specialist lawyer in a few simple steps, you can use our Ask a Lawyer service.
What are the key rules that apply to prize draws?
Rule 8 of the CAP Code sets out the rules that apply to promoters of prize draws/competitions. We’ve set out some of the key rules below, but you should make sure you are familiar and comply with all of the specific provisions of the CAP Code before running a promotion.
1. Provide all significant terms and conditions upfront
It’s very important that your prize draw provides all significant terms and conditions upfront in marketing materials to customers before they decide whether to participate. You should also make sure terms and conditions are available to entrants throughout the duration of the promotion.
Terms and conditions that are likely to be significant include:
- how to participate (including any entry costs, proof of purchase requirements or other restrictions to entry such as age, date or geographical restrictions);
- starting and end dates for the promotion;
- the nature and number of the prize/s or gift/s and any limitations of availability;
- the promoter’s name and address (unless obvious); and
- any other factors that might influence a customer’s decision to enter.
Significant terms and conditions should be stated in the initial marketing material (for online advertising the ASA have said this means on the same page as the ad, in the main ad). For example, the ASA previously held that a promoter giving away a weekend in Disneyland Paris should have included a prominent warning in the prize draw advertisement that the winner must respond to the confirmation email within 24 hours of receipt. It was not enough to include this requirement in the full terms and conditions, as it was a significant condition that was likely to affect the customer’s understanding of the promotion.
Note that online ads for gambling promotions have further restrictions and you should seek legal advice if you are distributing such ads. For access to a specialist lawyer in a few simple steps, you can use our Ask a Lawyer service.
2. Be wary of excluding terms due to limited space
If time or space on your initial ad is limited, it might be acceptable to include as much information about significant conditions as possible on that initial ad, and include the rest of the significant conditions on another webpage or alternative source. However, the ASA will assess this on a case-by-case basis, so the exemption may not always apply, and your own website or emails will be very unlikely to be considered limited by time or space. The ASA is also unlikely to consider social media posts to be limited by time or space.
3. Make sure other conditions are easily available
Non-significant conditions should also be made available before or at the time a customer enters the prize draw, but do not have to be as prominent as the significant conditions. For example, they could be included in an accompanying leaflet or on another webpage linked to from the ad.
These types of conditions include (but are not limited to) restrictions on the number of entries, any cash prize alternative, how and when winners will be notified and prizes received, how entries will be judged, and any information about transfer of copyright, publicity and return of entries.
4. Don’t change T&Cs during the promotion
You must not change terms and conditions during the promotion unless exceptional circumstances apply, or create and enforce new rules retrospectively after the competition has started. If exceptional circumstances apply, you still must not change any rules which would have affected a customer’s decision to enter the prize draw, or change a closing date if it would disadvantage the original participants, and you must make entrants aware of the new rules. Seek legal advice if you are considering changing terms and conditions of your prize draw retrospectively.
Make sure any links to terms and conditions are still accessible throughout the competition.
5. Don’t use misleading language
Don’t mislead entrants into thinking they have more of a chance of winning than they actually do (for example, by using the term ‘finalist’ where a customer has not actually progressed to a later stage of the competition).
Make sure you know the difference between a gift (available to many) and a prize (available to only a few). If a significant proportion of (or all!) entrants will be entitled to win an item, it should be referred to as a ‘gift’ rather than a ‘prize’.
6. Allow sufficient time
Allow sufficient time between the start date and closing date, and then until the announcement of the winners, to provide your business with adequate time to carry out judging and to announce the results.
7. Select winners fairly
For traditional prize draws you must ensure winners are chosen randomly, either by using a verifiably random computer process or by using an independent observer to select or supervise the draw (eg out of a hat).
If you are running a competition based on skill and subjective interpretation is needed to choose the winner, your judging panel must include at least one independent judge (ie someone who was not otherwise involved in the creation or running of the competition).
You must ensure you have enough resources to fairly conduct the promotion (for example by being able to track all entries and ensure all participants are included) and put appropriate measures in place to avoid your promotion being abused.
8. Make sure the prize is available
You need to make sure you award the prize as you’ve described it, or a reasonable alternative that is roughly equal in value. You should usually provide the prize within 30 days, unless you have specified a different time period in your terms and conditions, and make all reasonable efforts to contact the winner (simply ringing once is not enough).
9. Don’t charge customers to claim their prize
You are not allowed to charge customers to incur any costs in claiming their prize.
10. Be aware of your data protection obligations
You will almost always need to gather and use entrants’ personal data when running a promotional competition or prize draw. For example, you may need to gather entrants’ names and contact details so that you can inform them if they have won, and so that you can publish the names of winners.
You must only collect and use data which is absolutely necessary for running your promotion and store it securely and only for as long as you need it. Importantly,before you collect any personal information, you must clearly set out exactly why you are collecting it and what you intend to do with it (usually by providing entrants with access to a privacy policy containing this information). For full guidance about your data protection obligations when handling customer data see Collecting personal data.
You should also make sure you’re aware of any rules that apply to your specific industry (for example, you must make sure any promotions or product samples are safe and responsible, alcoholic drinks must not feature in, or be available through, promotions to anyone under 18, and special care must be taken with promotions addressed to children). If you are concerned about who will own the intellectual property of entries, you can find further guidance here.
For further guidance on advertising and marketing methods, including running promotional prize draws, see our Q&A on Marketing methods.
The content in this article is up to date at the date of publishing. The information provided is intended only for information purposes, and is not for the purpose of providing legal advice. Sparqa Legal’s Terms of Use apply.
Marion joined Sparqa Legal as a Senior Legal Editor in 2018. She previously worked as a corporate/commercial lawyer for five years at one of New Zealand’s leading law firms, Kensington Swan (now Dentons Kensington Swan), and as an in-house legal consultant for a UK tech company. Marion regularly writes for Sparqa’s blog, contributing across its commercial, IP and health and safety law content.