Memorandum submitted by The Gambling Commission
SUMMARY
1. The Gambling Commission is the regulatory
body for all commercial gambling in Great Britain, with the exception
of spread betting and the National Lottery. It will take on its
full range of responsibilities when the Gambling Act 2005 comes
fully into force in September 2007.
2. The Commission's interest in Call TV
Quiz shows focuses essentially around the question of whether
or not they will fall to be regarded as lotteries (or in certain
circumstances betting prize competitions) under the 2005 Act.
If so, they will require a Commission licence to operate. If not,
they will be free of regulatory control under the gambling legislation,
but not free of other regulatory controls by Ofcom and ICSTIS.
3. Call TV Quiz shows have many of the attributes
of what are defined as "complex lotteries" in the new
Act, in that they involve a series of processes in which the first
relies wholly on chance.
4. But many, if not all, operate a "free
entry" route. That has the potential to avoid the programmes
being classified as complex lotteries (or betting competitions)
if they meet a five point test in the Act, which covers such aspects
as the free route must be publicised to come to the attention
of all participants and that the system of allocating prizes does
not distinguish between the two routes. It is too early to be
sure, but it seems likely that some at least will qualify as "free
draws" in this way, thus avoiding regulation as lotteries.
5. If Quiz TV operators do choose to obtain
a Commission lottery licence, they would avoid the need to establish
"free entry" routes. However, at least 20% of the proceeds
would need to be allocated to a charity or other good cause and
they would have to abide by the Commission's licence conditions
and codes of practice, covering such matters as transparency of
game play and the ability of players to limit losses.
6. The Gambling Commission, OFCOM and ICSTIS
are maintaining close contact so that each is aware what the other
is doing in this area and with the intention that, if any Call
TV shows do obtain Commission licences, regulation is consistent.
INTRODUCTION
7. The Gambling Commission's interest in
Call TV Quiz shows focuses largely on a single issue. Are they
caught by the definition of a lottery in the relevant gambling
legislation? If they are, they require the appropriate Commission
permission to operate. If they are not (and provided they do not
fall within the definition of a "betting prize competition"—a
concept introduced to catch schemes such as "fantasy football"),
they are free of regulatory control under gambling law and therefore
fall outside the Commission's jurisdiction.
8. A new law, the Gambling Act 2005, comes
into force on 1 September 2007. This includes provisions designed
to clarify the distinction between lotteries, prize competitions
and free draws. In view of that, the Commission issued a consultation
paper last August on the implications of the new law in these
areas. A copy of that paper can be found on the Commission's website.
[9]Although
the paper ranges widely over all aspects of the distinction between
lotteries, competitions and draws, it created particular interest
and comment because of what it says about Call TV Quiz programmes.
The consultation closed at the end of October and the Commission
is considering the responses received. There have been around
50 in total: about half have come from operators of competitions
and draws, with most of the rest from trade bodies and from individuals/groups
who participate in competitions.
CURRENT POSITION
9. The current law on lotteries, competitions
and draws, at least in the Commission's view, is unclear. It is
enshrined in the 1976 Lotteries and Amendments Act and some, generally
old, case-law. For instance, the 1976 Act defines a prize competition
as one where success depends to a substantial degree on the exercise
of skill, but contains nothing which clarifies what "to a
substantial degree" means and the limited case-law does not
help much. Similarly, case-law has established that, if entry
is free, there is no lottery; it is a "free draw". But
there is little guidance on how "free" is to be interpreted.
10. The Commission acknowledges that there
is an argument that at least some Call TV Quiz shows may fall
to be regarded as lotteries under current law. But that could
only be established by pursuing a case through the courts. Such
a case would take considerable time and resources and would not
be resolved before implementation of the new Act, with its revised
structure and definitions, next September. The Commission has
informed a number of operators of its view of the current position
and some have responded by setting out why they believe their
offerings are compliant. Overall, the Commission considers there
is little to be gained in seeking to pursue a case now under the
existing, rather uncertain, law and has thus been concentrating
on the implications of the 2005 Act.
PROVISION RELATING
TO LOTTERIES,
COMPETITIONS AND
DRAWS IN
THE 2005 GAMBLING
ACT
11. The new law improves matters first by
defining what is a lottery and secondly by the inclusion of provisions
clarifying when something falls to be treated instead as either
a "prize competition" or a "free draw".
12. Of particular relevance to Call TV Quiz
programmes, the 2005 Act introduces a new concept of what is called
a "complex lottery". This is one where:
(a) persons are required to pay to participate;
(b) one or more prizes are allocated to the participants
in the scheme;
(c) the prizes are allocated by a series of processes;
and
(d) the first of these processes relies wholly
on chance.
13. Call TV Quiz shows commonly are of this
format. Participants call to enter via a premium rate telephone
number; all calls are connected and therefore all callers have
to pay for the premium rate call; but only a limited and small
number are selected to be put through to the studio to attempt
to answer the question asked or to complete a puzzle.
14. But, of equal significance for Call
TV Quiz shows, the Act also contains a schedule which sets out
how "payment to enter" is to be defined. It sets out
two circumstances in which an arrangement may qualify as a "free
draw".
15. The second of these is where people
have a choice of entry. Here the arrangement will not be treated
as requiring payment, and thus will not be a lottery if:
(a) each entrant has a choice between using the
paid or the free route;
(b) the free route involves either a letter sent
by ordinary post or some other method which is free in the sense
that its use does not involve paying any premium over what that
method of communication would normally cost;
(c) that free route (if something other than
sending a letter) is in any case neither more expensive nor less
convenient than the paid route;
(d) the choice is publicised so that it is likely
to come to the attention of all participants; and
(e) the system of allocating prizes does not
distinguish between those using either route.
16. Many, if not all, Call TV Quiz shows
offer a "free entry" route, usually via their websites,
and may qualify under the new law as "free draws", thus
falling outside the Commission's jurisdiction.
17. For completeness, it is worth noting
that the 2005 Act also sets out the circumstances in which an
arrangement or process is not to be regarded as relying "wholly
on chance" and hence is a prize competition and not a lottery.
Hence, under the new law, a prize competition will be one where
there is a requirement to exercise skill and judgement, or knowledge
that is reasonably likely to either:
(a) prevent a significant proportion of people
who wish to participate from doing so; or
(b) prevent a significant proportion of people
who participate from receiving a prize.
If either of these barriers to entry or success
can be shown, the process will not be deemed to rely wholly upon
chance, and the arrangements will not be a lottery. It would thus
be open to Call TV Quiz shows to alter their format such that
the first stage or process meets this definition, thus avoiding
regulation as a complex lottery.
FUTURE REGULATION
OF CALL
TV QUIZ SHOWS
18. As mentioned above, the Commission is
considering the responses to its consultation, as well as the
implications of various discussions it has had with those most
involved. From these, it seems clear that some, if not all, Call
TV Quiz show operators will wish to argue that the availability
of a "free entry" route using websites takes them out
of the definition of a "complex lottery" in the 2005
Act and therefore outside the Gambling Commission's jurisdiction.
It is too early to say whether the Commission will accept that
they meet the five point test of what is not to be treated as
payment established by the Act and outlined in paragraph 8 above.
But it seems likely that at least some will.
19. One or two operators have, however,
shown an interest in being licensed by the Commission, thus operating
their Call TV Quiz programmes as lotteries. They would be licensed
as external lottery managers, which are businesses (or individuals)
who run lotteries on behalf of charities and other non-commercial
societies (as defined in the Act). In such a case, at least 20%
of the proceeds would have to be allocated to the charities or
other good causes but it would, for example, avoid the need for
alternative, complicating "free entry" routes with the
consequential loss of revenue which they bring. All such licensed
operators would also have to abide by the requirements of the
Commission's forthcoming licence conditions and codes of practice.
These will address such matters as transparency of charging and
game play; the availability to players of facilities to limit
their losses; and information on responsible gambling and where
to get help if they believe they have a problem.
LINKS BETWEEN
THE GAMBLING
COMMISSION AND
OFCOM AND ICSTIS
20. Whether, in the event, any Call TV Quiz
operators will apply for a lottery licence remains to be seen.
But, if they do, they will bring a new challenge for the Commission
in ensuring that the quiz element itself meets the objectives
in the 2005 Gambling Act that "gambling is conducted in a
fair and open way". Some respondents to the Commission's
consultation have raised concerns about the fairness of the questions
or puzzles, about the difficulty in understanding the logic that
led to the solutions, and even at lack of confidence that answers
are not altered as the quiz processes. These are not issues in
other areas that the Commission currently regulates.
21. They are, however, already matters of
concern for both OFCOM and ICSTIS who also have regulatory responsibilities
in the area of Call TV Quiz shows. Likewise, if it transpires
that some organisers successfully operate as "prize competitions",
free of Gambling Commission regulation, while others choose to
operate under a Commission licence, it will be important that
regulation is as similar as possible for what are similar activities.
Those licensed will also have a legitimate expectation that the
three regulators have consistent requirements.
22. The Gambling Commission is already in
close contact with officials of both OFCOM and ICSTIS so that
these two bodies are fully aware of the Commission's thinking
and position. Equally, both organisations made submissions to
the Commission's consultation on prize competitions and free draws.
This close cooperation will continue.
15 November 2006
9 The Commission's website address is www.gamblingcommission.gov.uk.
The relevant document can be found at http://www.gamblingcommission.gov.uk/UploadDocs/Contents/Documents/Discussion_paper[1].pdf Back
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