24/11/2010

By Chris Evans, Solicitor at Charles Russell LLP

Tickets to the World Cup Final or the opportunity to meet an athlete; signed memorabilia or the chance to play at Wembley. Sport offers an almost incomparable opportunity for prizes, and those involved in sport are increasingly capitalising on their sporting connections to run competitions and promote their brand. Entry requirements range from sending in a postcard to physical tasks, and prizes range from the mundane through to once-in-a-lifetime opportunities — but what does a promoter organising a competition need to pay particular attention to when running a competition?

The most important piece of legislation affecting the running of a competition is the Gambling Act 2005, which is enforced through the Gambling Commission. In theory, prize competitions and free draws are free from regulation. However, it is not unusual for what on the face of it appears to be a competition to in fact be an illegal lottery. Although the following rather oversimplifies the test, a genuine prize competition must be based on skill, judgment or knowledge, and a free prize draw must be free to enter, or at least offer a free entry route. If the competition does not fall into either category, it is likely that it is an illegal lottery.

Once a promoter is clear that a planned competition will not fall foul of the Gambling Act, consideration should be given as to the nature of the prize being offered. For example, tickets to sporting events will often have limitations as to their redistribution and/or their use in relation to promotional activities. A promoter risks not only potential embarrassment, but also a possible claim for breach of contract, if a prize that has been offered and fairly won is subsequently forced to be withdrawn.

Where the promoter is offering a prize that is made or manufactured by a third party, the promoter must ensure that it is entitled to use images etc. of the product in connection with its promotion. This is likely to take the form of a licence or waiver from the product’s manufacturer, authorising the use of its intellectual property rights for such a purpose. Without such a licence, a promoter risks claims for infringement of intellectual property rights, such as trademark infringement and passing-off.

When the nature of the competition is known, and a prize has been chosen, the next step will be to put in place a robust set of terms and conditions. The terms and conditions will likely be drafted so as to be binding on anyone who purports to enter the competition. In some cases, a promoter may take greater comfort from an entrant actively consenting to the terms and conditions, for example, by ticking a box online or by signing an entry form.

The contents of the terms and conditions will largely depend on the nature of the competition and the prize. Consideration should be given as to what a participant is being asked to do to compete in the competition. It is likely that a liability waiver of some description will be needed; a competition involving any degree of physical participation by a competitor gives rise to the potential for physical injury, whereas a seemingly innocuous online puzzle may result in a virus entering a participant’s computer system. Liability for any loss or damage caused should normally be excluded, save where the promoter’s liability cannot be excluded by law.

Promoters must also give some consideration as to who is able to, and who may want to, enter their competition. This is likely, to some degree, to be governed by the promoter’s target audience. However, as an example, a competition offering alcohol as a prize should not permit entries from under 18s. Indeed, as a general rule, unless there is very good reason to do so (e.g. target audience), the competition should be restricted to over 18s as it is not possible to bind children to the competition terms and conditions under English law and they may, therefore, be unenforceable. Equally, a competition that permits entries from around the world could breach the national laws of a country where strict gambling laws are in place or where certain products may constitute unlawful prizes. A promoter may find itself in a difficult position if a prize had been legitimately won by an entrant, but to give the entrant that prize would be illegal. The simplest way to avoid any such problems is to give a clear indication of from whom and where entries will be accepted; any entries received that do not fall into such parameters will not be considered for the competition or be eligible for a prize.

It is likely that a promoter will wish to be able to use participants’, and particularly the winner’s, details, entries or images in its publicity material. For example, a promoter running a competition with a prize of playing at Wembley would almost certainly want to use photographs of the prize event at a later date. By thinking ahead as to how the competition and the prize can be exploited commercially, the promoter can gain the necessary consents and waivers from each participant in the terms and conditions. The alternative is to run the risk of consent being withheld at a later stage, and potentially the promoter’s objectives being frustrated.

Finally, be alert to any interaction between the competition with social media, such as Facebook and Twitter, which now forms an integral part of a large number of competitions. While these offer the potential to reach a wider audience, many promoters do not appreciate that there are strict guidelines in place should a competition be run through or supported by such sites. A promoter must therefore, on top of all the considerations detailed above, also ensure that any competition complies with the applicable conditions of use of the relevant social media application.


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