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If you are running a business or a charity, you may be considering different ways of marketing your product or your brand. One effective way of doing so is running trade promotions. However, there are certain legal rules that you must comply with if you are planning on running a nationwide trade promotion in particular. Failure to comply with the rules can result in fines. This article will explain:
- what a trade promotion is;
- some of the legal issues around running nationwide trade promotions; and
- how you can ensure that your trade promotion complies with all of the relevant laws.
What is a Nationwide Trade Promotion?
A trade promotion is simply a marketing tool designed to encourage potential customers to buy your product or service. A nationwide trade promotion is one that is open to all members of the public across the country to enter.
Typically, a trade promotion can be in the form of a lottery or a competition. Lotteries and competitions have different rules.
What is a Lottery?
The legal term ‘lottery’ has a technical definition in England and Wales. A lottery is a type of gambling and has three specific requirements:
- you must pay to enter the game;
- there is at least one prize in the game; and
- prizes are awarded purely by chance.
If you fail to get a licence from the Gambling Commission before carrying out your prize draw, then you may be subject to fines from the Gambling Commission. Therefore, it is important that you make sure you meet the regulatory requirements.
If you are running a lottery, you will also want to be clued up on lottery laws. Running an illegal lottery can also mean that you are liable to fines from the Gambling Commission. One key responsibility that you have when running a lottery is that the purchase price of a ticket for the lottery must reflect the opportunity that a person has to win the total prize pool. If you are unsure whether your trade promotion lottery meets this requirement, it is a good idea to seek legal advice before continuing.
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What is a Competition?
A competition, unlike a lottery, is not a game of pure luck. For a trade promotion to be a competition, it must involve some degree of skill or judgement. Some competitors must have an advantage over other competitors based on their:
- knowledge;
- expertise; or
- skill.
It is worth keeping in mind that for your game to be a competition, only one aspect of the game needs to require skill. For example, if you have a series of trivia questions followed by a luck-based prize draw, your game will still be a competition rather than a lottery because one aspect of the game involves a degree of skill.
If your game is a competition rather than a lottery, you will not need to get a licence from the Gambling Commission. However, suppose you run a competition, and it later emerges that the competition did not require enough skill and was, in fact, more similar to a lottery. In that case, you may be subject to fines from the Gambling Commission.
Key Takeaways
Running national promotions can be an effective way of carrying out a sales promotion by increasing the publicity of your brand or marketing your product to new customers. Trade promotions, such as trade promotion lotteries, can even increase your exposure to foreign investors and thus increase your business activities on the whole. However, you will want to make sure that you are familiar with regulatory requirements, such as lottery laws, if you plan to run a national trade promotion.
It is a good idea to seek legal advice if you are considering running a nationwide trade or sales promotion, as you will want to avoid the chance of being fined by the Gambling Commission. If you need help with trade promotions, our experienced regulatory and compliance lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.
Frequently Asked Questions
A lottery is a game of pure chance, such as a luck based prize draw.
Yes – running a lottery as a charity can be a good way of fundraising in the public interest. You may not have to get a licence if you are operating as a charity, so it is a good idea to seek professional legal advice as to your position when running a trade promotion.
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