A Guide for Promoters on Managing Free Prize Draws and Competitions during the Covid-19 Pandemic
09 April 2020
The current pandemic has disrupted everyone's life and business. Although not top of the agenda for most businesses, one question UK promoters are asking is how to deal with their ongoing free prize draws and skill-based competitions.
The short answer is (spoiler alert): by aiming to cause as little inconvenience and disappointment to entrants and potential entrants as possible! This note contains practical tips and guidance on how to achieve that.
Indeed, this could be a deceptively important question for many brands, given that the way they handle this kind of issue can be interpreted by consumers as a barometer of that brand's values and overall approach to consumers when the going gets tough. So promoters should not discount the importance of managing promotions effectively at this time.
BACKGROUND & GUIDING PRINCIPLES
This advice is mainly aimed at medium to long term promotions which started before the Covid-19 pandemic, and which are now being disrupted by it.
The rules governing promotions (i.e. free prize draws and competitions), come from the CAP Code.
As we know, the overarching principles of the CAP Code are that all marketing communications (including promotions) must be legal, decent, honest and truthful, and must be prepared with a sense of responsibility to consumers and society. Advertisers and promoters alike must ensure they follow the spirit (and not merely the letter) of the CAP Code.
When it comes to promotions, the CAP Code makes clear that promoters must conduct their promotions equitably, promptly and efficiently, and be seen to deal fairly and honourably with participants and potential participants. Promoters must avoid causing unnecessary disappointment.
These broad and grandiloquent principles are all very well, but what do they mean in practice?
The specific rules for operating promotions come from Section 8 of the CAP Code. We won't set out all these rules here, instead we will focus on the approach the ASA is likely to take to them in the current climate.
For context, the Chancellor, Rishi Sunak, set out a range of measures to address the economic impact of Covide-19 several weeks ago. He challenged MPs, cabinet colleagues, business leaders and industry bodies to identify opportunities to support the most affected industries. As part of that call to arms, he encouraged ‘regulatory forbearance’ to keep the economy and society going through these challenging times.
Why is this relevant to promotions?
This concept of ‘regulatory forbearance’ is relevant to promotions because the primary regulator, the Advertising Standards Authority (ASA), has taken note of the Chancellor's call for regulatory forbearance.
The ASA issued a statement which made clear:
"The ASA is very conscious that in this time of national crisis it must act sensitively and with due regard to the circumstances faced by businesses and members of the public. In practice, this means applying a lightness of touch in some areas of our work and in other areas an uncompromising stance on companies or individuals seeking to use advertising to exploit the circumstances for their own gain.”
What does this mean in practice?
Promotions are an area where we are likely to see a ‘lightness of touch’ by the ASA. This means we would expect the ASA to show a good degree of pragmatism and lee-way in relation to promoters who act in good faith to resolve practical issues which disrupt their promotion for reasons which are genuinely beyond their control.
HOWEVER, this is likely to hold true only if the promoter chooses a path through those issues which will cushion the adverse impact on consumers/entrants, and which minimises disappointment. This will almost certainly involve finding a way to award the prize which was originally offered.
In most cases, this will also mean trying to keep the promotion open for as long as it was originally planned where possible, rather than ending the promotion sooner than expected, or extending it.
If it has proven impossible or very difficult for consumers to enter during the original entry period for practical reasons associated with the current 'lockdown', which has significantly reduced the ability of consumers to move around or even to go into shops, it might be reasonable to extend a promotion which relies on entrants being particularly mobile, provided those who did enter are not unduly disadvantaged.
For example, Buy this can of Cola for your chance to win a dream holiday worth £5,000. In this scenario, it might be reasonable to extend the promotion period if most of the cans were on the shelves of shops which had to close during the pandemic. But cancelling or pulling the promotion without awarding a prize to one of the entrants is very likely to breach the CAP Code, and could even breach the consumer protection regulations for which you could be prosecuted (though prosecution is unlikely in practice).
Promotions which are run exclusively online (and aimed at UK consumers) are unlikely to be disrupted by the pandemic (save in relation to the prize - see below), so promoters should not use the pandemic as an excuse to pull a poorly-performing promotion. (Apologies for the awful alliteration).
If it is necessary to amend the promotion itself in some way, keep the amendments to a minimum. Consider how best to minimise the impact on those who may wish to enter and those who have already entered.
But I have a force majeure clause...
As we have mentioned above, it will hardly ever be acceptable to pull a promotion without awarding a prize (or a reasonable alternative if the original prize cannot be awarded). Doing so will almost certainly breach the CAP Code and even consumer protection regulations.
This is the case even if the Terms & Conditions include an express right to cancel or a force majeure clause. This is doubly true of promotions which were used as an inventive to purchase a product, such as our Cola example above.
There will be many instances of promotions whose prizes have been disrupted or destroyed by the current pandemic. As should be clear by now, in most cases it will be appropriate to respect the original closing date, and this includes situations where only the prize is adversely impacted by the pandemic.
For example, if the grand prize involved tickets to a concert or sporting event which has now been cancelled, or the prize was a holiday which had to take place in the coming weeks, this isn't a reason to cancel, curtail or extend the promotion. Instead, given that only the prize is affected by the pandemic, the promoter should proceed with the promotion, choose a winner, and provide a reasonable alternative prize.
The alternative prize must be of equivalent or greater value.
In practice, it can be sensible to offer the winner two reasonable options (but not not an unlimited menu of options), so they can express a preference based upon their personal circumstances. This will help avoid disappointment.
Expanding on our example of tickets to a sporting event which has now been cancelled: if the original prize was two tickets to the final of a particular football tournament which has now been cancelled, reasonable alternatives would include (a) tickets to the final when it actually goes ahead (e.g. the following year), or (b) the cash equivalent of the prize (payable within 30 days of the closing date).
Sometimes another alternative can be found which doesn't have a clear monetary value, e.g. a football shirt signed all the players on the winner's favourite team, which it might be easier or cheaper for the promoter to procure. In those circumstances, it is advisable to hold some proof that it is of equal or greater value compared with the original prize, such as an independent appraisal of the value.
It is sensible to ask the winner to confirm in writing that they are happy to accept the alternative prize in lieu of the original prize. However, promoters must tread lightly, and be careful not to threaten to withhold a prize if the winner doesn't agree to sign a document which confirms their acceptance of the new prize. This is especially the case if the original Terms & Conditions did not make it a condition of awarding the prize that the winner signs a short confirmation that they were eligible to enter and that they have complied with all of the Terms & Conditions of the promotion. An email or other written confirmation from the winner that they are happy to accept the alternative prize is likely to be sufficient. But gratitude tends to evaporate pretty quickly, so it is not advisable to rely exclusively on phone calls which can be disputed later on.
A final word on prizes, the CAP Code requires that prizes are normally awarded within 30 days, but this is an area where there is likely to be some 'regulatory forbearance', given the circumstances.
WHOSE FAULT IS IT ANYWAY
Let Down by Suppliers?
If you are let down by a third party who was supposed to provide the prize, or by a delivery company, unfortunately, the ASA's view is that that is tough.
The CAP Code makes clear that promoters are ultimately responsible to entrants for awarding the prize on offer, and ensuring they reach the winners - so if your suppliers or delivery companies let you down, it remains the responsibility of promoters to ensure entrants are not affected and the prize (or a reasonable alternative) is awarded.
You might still be able to sue the prize providers or delivery companies later for losses you might suffer as a result of their failures, but that does not affect or interest entrants or the ASA.
We strongly recommend that prizes involving physical delivery are sent using tracked deliveries, and that promoters take out adequate insurance.
Any changes to ongoing promotions must be communicated clearly to consumers. This includes situations where promoters know, before the closing date, that the original prize cannot be awarded.
Social media is often a good way of doing this, directing entrants and potential entrants to more details on the promoter's website. But it's important to try to reach all those who might have seen the original marketing communication or pack which encouraged consumers to enter the promotion, so consider the most appropriate media for doing that. It might be appropriate to contact all entrants via email (if you hold that information), but consider whether this is necessary (given that they have already entered so there's less value in reaching them than in reaching potential entrants) and speak to a data protection expert before doing so.
Remember to go back to the principles set out at the top of this note. Act in good faith, avoid causing disappointment, consider whether it really is necessary to make any changes (and keep them to a minimum if it is), communicate those changes as necessary, and award the prize or a reasonable alternative.
Remember that consumers, including those who haven't entered, might see the way you handle these situations and may treat it as a barometer of how you deal with consumers when the chips are down.
For more information and free guidance about advertising and marketing issues, see our Covid-19 Survival Guide for the advertising and marketing industries at adlaw.lewissilkin.com
For information and free guidance on issues including business continuity, contractual considerations and employer/employee relations, visit our Covid-19 hub at www.lewissilkin.com/coronavirus