Why are no purchase necessary routes important?
This month it was announced that ITV face the threat of fines for failing to correctly handle prize entries received via their No Purchase Necessary (NPN) route for some prize promotions they ran. The PromoVeritas Legal Counsel Jorja Knight considers what an NPN really is and why it is important.
“Ofcom, the TV Regulator, are investigating whether ITV breached their rules and licence requirements on the proper running of premium rate viewer competitions. In a statement to The Times ITV said that due to “a small number of individual administrative errors” NPN postal entries received for six of their on air prize ‘competitions’ were not included into the prize draw pool along with all the entries received via premium rate phone or texts. The discovery was made via an audit covering the past six years and ITV promptly informed Ofcom. ITV are likely to be very aware of the issues they face having been fined a record £5.67 million by Ofcom in 2008 for a series of rigged premium-rate phone voting promotions across a variety of shows.
Although ITV have not revealed which shows were affected –they are generally pay to enter promotions on shows like Good Morning Britain, This Morning and The X Factor – they pointed out in a statement that “The six competitions amount to roughly one third of one per cent of our competitions since 2014, and a tiny fraction of total entries.”
Why No Purchase Necessary Routes are important
So, is it worth making such a big deal about 0.3% of total entries? The short answer is yes. Firstly that 0.3% is in fact a percentage of all of ITV’s promotions over the past six years – not the percentage of entries that missed out on a chance to win in those six specific promotions. For those six promotions, the percentage represented by the ‘lost’ postal entries could have been as much as 40-50%. That is very significant.
Secondly, our view, after running thousands of promotions with an NPN route, is that every entry does matter. People have taken the time to write down an entry, put it into an envelope or onto a postcard. There will be thousands of people who have spent 60-70p on postage with no chance of winning.
But, most importantly it is a legal requirement – not best practice, not CAP Code, but hard law from Parliament, failing to run it properly is a criminal offence.
What is the no purchase necessary law?
Until 2005, UK Gambling Law banned games of chance, i.e. prize draws, that required a purchase or payment to enter. Promoters would get around the law by not requiring consumers to make that purchase to enter. You could buy the product, or you could simply send your name on a postcard in for the same chance of winning – the infamous No Purchase Necessary route.
The Gambling Act 2005 amended the law and clarified that the purchase of a promoted product at its normal price was not to be regarded as a ‘purchase’, nor was the price of a stamp, or a standard phone call or text message. You could now insist that people had to buy your product for the chance to enter a draw, or get a lucky code, and there was no need to offer an NPN.
However, this only applies where there is no extra cost to enter (above the product purchase or the necessary cost of communicating one’s entry, that stamp or standard call or text). If you charge a premium rate, then that is regarded as a purchase, and unless it is a genuine competition, with winners selected based not on luck, but on skill and judgement, then without the appropriate licence it would be an illegal lottery.
Whilst ITV and most TV companies call these types of promotions, ‘competitions’ they are in fact simple prize draws. There is little or no skill required. They are purely run as revenue generators, for a profit. To stay on the right side of the law, as well as charging their premium rates, £2+ for a call or text, the TV companies also offer an NPN route, an alternate and free (aside from cost of stamp) means of entry that by law must be well communicated, up front, and must offer entrants the same chance of winning. The failure of ITV to include those postal entries is a breach of the Gambling Act.
What does it mean for FMCG and other Promoters?
NPNs have not died out completely. The Gambling Act 2005 only applies to England, Scotland, and Wales. It does not yet apply to Northern Ireland. This is why on many branded packs with instant wins or prize draws, you will see ‘NPN, NI Only….’. We run a lot of these for our clients, and it is vital that they are promoted correctly, on packaging and media, and that they are run well – giving all entrants an equal chance of winning. It is hoped that NI law will be brought into line with GB law soon, but until then, do please consult with us as to whether an NPN is needed for your next promotion.
A genuine prize ‘competition’ one that via skill or judgement is likely to prevent a ‘significant proportion’ of people from participating or winning does not require either an NPN route, even if charged at a premium rate, nor a gaming licence. But these do cost more to administer and can put off entrants.
Be very clear
In addition to the law, the CAP Code Rule 8.17.2 states that a free entry route must be explained clearly and prominently. As it is a ‘significant condition’ it must be stated clearly on promotional packs, advertising materials and in the Terms & Conditions. These entries must always be included and have an equal chance of winning.
Conclusion on no purchase necessary
For now, we must wait and see the outcome of Ofcom’s investigation, but this administrative error highlights how important it is to plan and monitor all aspects of your promotion. Even the smallest problem can result in big trouble.