41/06    1 March 2006

A company distributing misleading premium rate scratchcard promotions, which charged consumers up to £9 to discover what they had 'won' has been stopped, following action by the OFT.

Cheshire-based Gr8 Games Limited distributed in total over 20 million scratchcards for a premium rate prize competition informing consumers that they could 'Win £50,000 Cash' or other high value prizes. The scratchcards were distributed to customers in various forms, including by mail and through magazines.

Customers were urged to claim their prize by calling or texting a premium rate number. Calls were charged at £1.50 per minute and lasted up to 5 minutes 50 seconds. The total cost of each call was up to £8.75. Texts cost £9. Nearly 45,000 people responded.

The OFT considered that the 'Win £50,000 scratchcards' were misleading because:

• their presentation and layout gave the recipient the impression that they had won a prize of £15,000, when in fact nearly everyone who responded was only entitled to a low-value 'giveaway' prize such as a cheap camera or watch
• they gave the impression that the 'giveaway' prizes were of equal or similar status to the major prizes
• important information likely to affect the recipients' decision on whether or not to take part in the promotion such as the quantities of each of the prizes available and additional costs  payable by participants for claiming some of the prizes were only found within the small print on the reverse of the scratchcards
• information likely to affect the recipients' decision to take part in the promotion such as additional costs payable by participants for claiming any electrical items won, was only found in small print on the reverse of the scratchcards.

The OFT also formed the view that the scratchcard promotion constituted an unlawful lottery as it considered that there was no genuine free entry route. Details of the postal entry route for claiming prizes was provided in the very small print on the reverse of the scratchcards, whereas the details of the premium rate entry routes were given prominence on the front.

Gr8 Games Limited and its officers have provided the OFT with binding undertakings, under Part 8 of the Enterprise Act 2002, in relation to future contraventions of the Control of Misleading Advertisements Regulations and the Lotteries and Amusements Act. If the undertakings are breached the OFT could seek a court injunction. Failure to obey a court injunction could result in proceedings for contempt of court.

If the undertakings are breached the OFT could seek a court injunction. Failure to obey a court injunction could result in proceedings for contempt of court.

The OFT worked closely with the Advertising Standards Authority, ICSTIS, and trading standards services in collecting evidence for this case. This is the latest enforcement action taken by the OFT against deceptive premium rate prize promotions (see note 4).

Christine Wade, Director of Consumer Regulation Enforcement, said:

'These scratchcards were highly misleading and encouraged consumers to call or text the premium rate numbers in the hope of receiving a major cash prize. The OFT will continue to crack down on promotions that make misleading claims which harm consumers' interests.'  
            
NOTES

1. Gr8 Games Limited and its company officers all signed undertakings in January 2006.

2. Gr8 Games Limited's company officers are Giles Wallet Griffiths and Sarah Elizabeth Smiley. The business address of Gr8 Games Limited is Barrington House, Hayes Lane, Alderley Edge, Cheshire SK8 7TA.

3. Part 8 of the Enterprise Act 2002 came into force on 20 June 2003. The Enterprise Act improves consumer protection by giving OFT and other enforcers strengthened 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.

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 regulator, and the Advertising Standards Authority to target the companies and individuals behind deceptive premium rate prize promotions. See press releases 122/05, 90/05, 55/05, 2/05 and 220/05 for details of other enforcement actions in this area.

5.The OFT has also taken enforcement action to tackle scams directed at UK consumers, often with the co-operation of other enforcement agencies in the UK and abroad. Tackling mass-marketed scams is a priority area for the OFT over the next three years. The OFT has set up a specialist team to target the most prevalent scams with the aim of reducing the harm suffered by consumers and increasing consumer confidence in legitimate mass marketing to the benefit of all decent  businesses.

6. The Control of Misleading Advertisements Regulations 1988 (CMARs) came into force on 20 June 1988 implementing an EC Directive on misleading advertising. The OFT's powers under the CMARs are triggered if an advertisement is misleading  (i.e. it must deceive the recipient and affect their economic behaviour, or for those reasons, harm the interests of a competitor), and is published in connection with a trade, business, craft or profession, in order to promote the supply or transfer of goods or service, 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 Amusement 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. The LAA authorises small lotteries incidental to exempt entertainments, private lotteries, lotteries of certain registered societies and local authority promoted lotteries where they meet certain conditions prescribed by the LAA. The undertakings given in this case deal with contraventions of section 2 (1) of the LAA.

8. ICSTIS is the industry-funded regulatory body for all premium rate charged telecommunications service. ICSTIS regulates the content, promotion and overall operation of services through its Code of Practice.

9.The Advertising Standards Authority (ASA) is the UK self- regulatory body for advertising. It administers Codes for both broadcast and non-broadcast advertising.