Investigation into prize draw promoters

Investigation into prize draw promoters Purely Creative Limited, Strike Lucky Games Limited, McIntyre & Dodd Marketing Limited and The Winners Club Limited.

Case reference number: CRE-E/16752

Start date: April 2008

Next milestone: Following the Court of Justice of the European Union's (ECJ) preliminary ruling on the interpretation of Annex Practice 31 of the Consumer Protection from Unfair Trading Regulations 2008 (CPRs), the matter will now return to the Court of Appeal in order to determine the appeals in this case. This is likely to involve replacing the Order made by the High Court on 10 May 2011 with an Order which reflects the ECJ's ruling on the law.

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Summary of work/background

On 22 December 2009 the OFT issued High Court proceedings against the companies and individuals behind prize draw promotions which the OFT considers are misleading and in breach of the Consumer Protection from Unfair Trading Regulations 2008 (CPRs).

The proceedings sought an enforcement order to prevent unfair commercial practices by Purely Creative Limited, Strike Lucky Games Limited, McIntyre & Dodd Marketing Limited, The Winners Club Limited, and Dodd Marketing Limited.

The enforcement order was also sought against Adrian John Williams, a common director of all the companies, and Wendy Elaine Ruck, the common company secretary, as well as Catherine Cummings a second director of Purely Creative Limited, and Peter Jude Henry, a previous director of The Winners Club Limited.

Purely Creative Limited and Strike Lucky Games Limited promote various premium-rate prize draw scratch-cards which are distributed nationally through inserts in magazines and newspapers. McIntyre & Dodd Marketing Limited and The Winners Club Limited issue direct mailings. The action was taken under the Enterprise Act 2002 (EA) for alleged breaches of the CPRs.

The companies believed that their promotions complied with the relevant laws and guidelines and refused to cease their publication.

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Update: 2 February 2011

The hearing took place in the High Court between 13 and 18 January 2011.

The OFT welcomed a landmark High Court ruling on 2 February 2011 that the promotions distributed by the above mentioned companies and individuals are in breach of the law.

Some of the ways in which the promotions were held by the Court to be in breach of the CPRs include the following:

• by creating the impression that the recipient has won a prize, when in substance the consumer is simply being offered the chance to purchase a low value item
• by deceiving consumers as to the geographical origin of particular products
• by describing a holiday voucher as a prize, when in fact it would cost the consumer a significant sum actually to go on the holiday
• by downplaying the costs to consumers of calling a premium number to find out what they have won.

The Court indicated that it would make orders (or consider accepting undertakings to the Court) against the companies and its officers which would require them to cease or otherwise discontinue breaches of consumer law identified in the judgment.

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Update: 29 July 2011

At a hearing on 17 March 2011, the Court ruled that it would accept undertakings from the defendants. The undertakings, which were incorporated into an Order (pdf 139kb) and were endorsed by the Court on 10 May 2011, prevent the companies and individuals from:

• creating the false impression that the consumer has won a prize, when in fact taking any action recommended by the trader in relation to claiming the prize (such as, for example calling, a premium rate telephone line or sending a reverse charge SMS text) is subject to the consumer paying money or incurring a cost which is either:
  
  -  a substantial proportion of the unit cost to the trader of purchasing and distributing the 'prize' or
  -  in the case of a charge stated to be for 'delivery and insurance,' used by the trader to finance in whole or in part the acquisition, handling or other cost of the making available of the 'prize', other than the actual cost of its delivery to the consumer and insurance (if any) in transit
• giving, whether by act or omission, a misleading impression as to the value to the consumer of the 'prize' by:
  
  - misrepresenting its geographical origin
  - misrepresenting or omitting details as to the nature of a holiday
  - misrepresenting or omitting details as to the likely take up cost of a holiday
• omitting to identify the minimum cost liable to be incurred by a consumer in responding by premium rate telephone call to the prize promotion 
• giving consumers the misleading impression that they have been fortunate to have won a most frequent award in a scratchcard competition when all or substantially all recipients of the scratchcards are winners of at least such awards, or
• describing a cost that the consumer is invited to incur as relating to a particular service, such as delivery or insurance, when this is not in fact the case.

From 17 March 2011 all promotions commissioned by the companies and individuals must comply with the undertakings.

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Court of Appeal hearing

On 6 April 2011 the defendants (with the exception of the 9th defendant) appealed certain findings of the High Court in relation to Annex Practice 31 of the CPRs. On 15 April 2011 the OFT sought permission to cross-appeal. Following an application by the 1st to 8th defendants to expedite the hearing, the Court of Appeal hearing took place on 20 - 21 June 2011.

The Court of Appeal issued a judgment (pdf 133kb) on 29 July 2011 in which it stayed the appeal and cross-appeal and referred certain questions on the interpretation of Annex Practice 31 of the CPRs to the European Court of Justice (ECJ) (pdf 264kb). The ECJ will give a preliminary ruling on interpretation of Annex Practice 31 to ensure the uniform interpretation of the Unfair Commercial Practices Directive (which the CPRs implement in the UK) in all Member States. The High Court Order remains in place.

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ECJ preliminary ruling

The OFT welcomed a landmark decision by the ECJ on the 18 October 2012 which held that aggressive practices which give the consumer the impression that he has won a prize while he is invited to pay a cost to claim it are prohibited absolutely.

In its decision the Court stated that where a trader informs consumers that they have won a prize, they must not ask the consumer to pay money or 'to incur any cost whatsoever' in order to claim it. Consumers must be able to register their entitlement to a prize, find out more information about it, and take possession of it, without being invited to spend money.

Prohibited costs include

• costs that are very small in relation to the value of the prize 
• costs that do not benefit the prize promoter (such as the cost of a stamp).

Further, traders are not allowed to offer consumers a number of methods of claim, even if one of which is free, if any of the other methods offered involve the consumer incurring a cost.

The Court said that the concept of a true 'prize' should be preserved, meaning that a prize in respect of which the consumer is obliged to make a payment of whatever kind in order to claim it cannot be regarded as a 'prize'. Where people are told they have won a prize, this has a psychological effect on them, meaning that they may be more willing to call a premium rate number, travel to collect an item or pay delivery costs for it. The court concluded that 'it is the very prospect of taking possession of the prize which influences the consumer and may cause him to take a decision he would not take otherwise, such as choosing the quickest method of finding out what prize he has won, even though that may be the most expensive method'.

Finally, traders should also make clear what the prize on offer actually is, so that consumers can identify it and assess its nature. Wording must be clear and legible, and also understood by the people targeted by the promotion. For example in the case of a cruise offered as a prize, the promotion must make clear the itinerary, points of departure and arrival, and the type of accommodation and meals provided. However precisely what information is necessary will depend on the details of the promotion being run, and so should be assessed by national courts.

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Related documents

• Press release OFT seeks court order against prize draw promoters 11 January 2010
• Press release OFT welcomes landmark High Court ruling on misleading promotions 2 February 2011
• Judgment of Mr Justice Briggs, 2 February 2011 (pdf 3.6Mb)
• High Court Order, endorsed by the Court on 10 May 2011 (pdf 139kb)
• Court of Appeal judgment, 29 July 2011 (pdf 133kb)
• Reference 29 July 2011 (pdf 264kb)

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Team leader

Mike Lambourne (020 7211 8568, mike.lambourne@oft.gsi.gov.uk)

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Project director

Jason Freeman (020 7211 8262, jason.freeman@oft.gsi.gov.uk)

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Senior responsible officer

Cavendish Elithorn (020 7211 8170 cavendish.elithorn@oft.gsi.gov.uk,)

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Media enquiries 

Any media enquiries should be directed to a member of our Press Office.

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