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Press releases 2006 -

Prize promoter gives undertakings to High Court

160/06    15 November 2006

Following action by the OFT, a premium rate prize promoter and its director have given undertakings to the High Court that they will not publish misleading prize draw advertisements or promote unlawful lotteries.

Churchcastle Limited distributed over 446,000 mailings under the name 'Prize Line' giving the impression that the recipient had been awarded a major prize. Consumers were urged to reply immediately by calling a premium rate number at a cost of £1.50 per minute. At least 56,000 people called the premium rate number. With calls lasting up to five minutes, the total cost to some callers was as much as £7.50.

The OFT considered that the mailings were misleading as their layout and presentation gave the impression that, as a result of an entry in a previous competition, recipients had won a major prize such as £10,000 cash, a fitted kitchen, or a widescreen television. In fact nearly everyone who responded was awarded a low value 'giveaway' item of a voucher booklet which was subject to restrictions on its use. The OFT also considered that the mailings constituted unlawful lotteries because the free entry route to participate in the prize draw was not publicised in such a way as to be likely to come to a recipient's attention. The company sent out similar mailings in the name 'Prize Trust' and 'UK Prize Foundation'.

Churchcastle Limited and its director Neil Frogley had previously given undertakings to the OFT in June 2005 in relation to other premium rate prize mailings. However, the OFT believed that they had breached those undertakings.

The undertakings to the High Court were given under the Enterprise Act 2002 and relate to compliance with the Control of Misleading Advertisements Regulations 1988 and the Lotteries and Amusements Act 1976. If a company or person who gives an undertaking to the court subsequently breaches them, they may be held in contempt of court which can carry a penalty of imprisonment, a fine or asset seizure.

The OFT worked closely with Local Authority Trading Standards Services, the Advertising Standards Authority and ICSTIS in collecting evidence for the court action.

Christine Wade, Assistant Chief Executive, Consumer Advice and Trading Standards said:

'This company published misleading mailings that gave the impression that recipients had won a major prize in order to induce them to call a premium rate number. We will not hesitate to act to protect consumers from deceptive practices such as this.'

NOTES

1. The consent order containing the undertakings to the High Court was sealed by the court on 16 October 2006.

2. Churchcastle Limited, and Neil Frogley, previously gave undertakings to the OFT on 2 June 2005. See press release 122/05.
 
3. The registered office of Churchcastle Limited is Enterprise House, 21 Buckle Street, London E1 8NN. The company also has a trading address at Unit 30, Carlson Court, 116 Putney Bridge Road, London SW15 2NQ.

4. Using its powers under Part 8 of the Enterprise Act, the OFT has been working in partnership with local Trading Standards Services, ICSTIS, the premium rate services regulator, and the Advertising Standards Authority to target the companies and individuals behind deceptive premium rate prize promotions. See press releases 125/06, 105/06, 41/06, 122/05, 90/05, 55/05, and 2/05 for details of other OFT enforcement actions in this area.

5. Part 8 of the Enterprise Act 2002 came into force on 20 June 2003. The Enterprise Act improves consumer protection by giving enforcers increased powers to obtain court orders against traders that breach a range of consumer legislation controlling activities such as misleading advertising, misleading price indications, lotteries, sale of goods and services, underage sales, estate agency, misleading health claims, trade descriptions, mock auctions, timeshare, unfair terms in consumer contracts, doorstep selling, distance selling, package travel and consumer credit.

6. The Control of Misleading Advertisements Regulations (CMARs) 1988 largely implements EU Directives on misleading and comparative advertising. They aim to protect the interests of consumers and businesses from misleading advertisements and advertisements that make prohibited comparisons. The OFT's main role under the CMARs is to support and reinforce the existing advertising controls exercised by other bodies, not to replace them. The OFT will step in where it is in the public interest that an advertisement should be stopped and future misleading advertisements prevented by means of a court injunction against those concerned, or by the threat of it.
 
To come within the scope of the CMARs, an advertisement must be misleading (i.e. it must deceive or be likely to deceive the recipient and affect their economic behaviour, or for those reasons harm the interests of a competitor), and be published, in connection with a trade, business, craft or profession, in order to promote the supply or transfer of goods or services, immovable property, rights or obligations. The OFT can take action against anyone appearing to be concerned or likely to be concerned with the publication of a misleading advertisement.

7. The Lotteries and Amusements Act 1976 (LAA) provides that all lotteries and raffles (except where specifically authorised by the LAA or the National Lottery etc. Act 1993) are unlawful, and makes it an offence to be involved with their promotion.




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