Newsroom

OFT acts against misleading premium rate prize giveaways

122/05    6 July 2005

The OFT has obtained undertakings from the promoter of two premium rate prize competitions that it will not use misleading advertising to promote such competitions.

Churchcastle Limited, trading as 'Fast Cash' and 'UK Prize Bonanza', sent unsolicited mailings to nearly 1.4 million consumers telling them they were entitled to claim one of the awards listed and urging them to act quickly to claim their 'prize' by calling a premium rate number at a cost of £1.50 per minute. Calls lasted up to five minutes, each call costing around £7.50. Over 190,000 people called the premium rate numbers used in these promotions.

In the OFT's view, the mailings were misleading as their layout and presentation gave the impression that the recipient had been lucky and had won a major cash prize of £5,000 or £10,000. In fact, nearly everyone who responded only received 'giveaway' items such as vouchers for discounted holidays, health and leisure services or a family portrait. However, these vouchers were subject to restrictions on their use.

The OFT worked closely with trading standards, the Advertising Standards Authority and the Independent Committee for the Supervision of Standards of Telephone Information Services (ICSTIS) in collecting evidence for this case.

The OFT obtained binding undertakings from the company, its director Neil Frogley, and employees Karen Davies and Carly Assell addressing their future conduct. They have undertaken, among other things, that they will not publish or distribute materials giving the misleading impression that:

• a recipient of an advertisement has previously entered a competition, promotion or prize draw
• a recipient has won a major prize
• each prize appearing in a list of prizes is a major prize or that each prize in a list of prizes is of equal or similar value or status.

The promoters have also undertaken that in future they will not act in connection with the promotion of an unlawful lottery in contravention of the Lotteries and Amusements Act 1976 (see note 4).

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

Penny Boys, OFT Executive Director, said:

'Misleading mailings such as these deceive consumers and damage the reputation of fair-dealing businesses using legitimate direct marketing techniques. We will continue to work with fellow enforcers to stamp out these practices.'

NOTES

1. The undertakings were signed by Carly Assell on 1 June 2005 and by Churchcastle Limited, Neil Frogley and Karen Davies on 2 June 2005. 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.

2. 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.

3. The Control of Misleading Advertisement Regulations (CMARs) 1988 largely implement 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.

4. 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. 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.

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

Back to:2005