Promotions are a very common marketing tool designed to encourage consumers to choose one particular product over another. But such promotions have strict legal requirements that more often than not require a lottery licence from the District Court.

All too often, we only read the terms and conditions of a promotion (which is legally termed a 'lottery') when we win a prize, but actually the terms and conditions make for an interesting read. Cadbury, the chocolate manufacturer, recently ran a promotion on its Dairy Milk chocolate bar which encouraged us to 'unwrap happiness' with '10,000 prizes to be won instantly'. Such prizes included mopeds, around-the-world tickets, personal shopper days and sports vouchers. But a review of the terms and conditions reveals that while the promoter of the promotion is Cadbury Ireland, the lottery licence-holder is actually the Irish Wheelchair Association.

Such licences are obtained from the District Court. It is quite common for a company to team up with a charity to run some form of promotion. The main reason for the charity holding the lottery licence is a requirement that the promotion must be for some charitable purpose. The legislation governing the running of a lottery (promotions often fall within the definition of a lottery) is the Gaming and Lotteries Act 1956-1986. This says that a lottery permit or licence must be obtained if a lottery is to be promoted. A lottery licence granted by the District Court authorises the holding of a series of lotteries or draws, the total value of the prizes for which cannot exceed €20,000 on any occasion.

If more than one lottery is held in any week, the total value of the prizes for the week cannot exceed €20,000. The lottery may be promoted in any part of the State, as well as the district in which the court granted the licence. The District Court may grant a licence for a promotion for a period not exceeding one year. However, there are a number of requirements that must be fulfilled, which include:

• the lottery should be for some charitable or philanthropic purpose or purposes
  
  
• the licensee should derive no personal profit from it
  
  
• the value of each prize must be stated on every ticket or coupon
  
  
• no more than 40% of the gross proceeds can be used for the expenses of promotion, including commission, and any free entry for the lottery will be deemed to be a payment of commission to the extent of its value.

Overall, it seems that everyone is a winner - the consumer receives a prize (if they're lucky), the charity receives a donation from the promoter, and the promoter hopefully experiences an increase in sales due to the popularity of the promotion. The offences under the Gaming and Lotteries Act 1956-1986 carry relatively small monetary penalties. However, if a promotion is found to constitute an illegal lottery, this may result in consequences that could have a negative commercial impact.

Under the Act, it is an offence to import, print, publish, distribute, sell, offer for sale or even to have in your possession for sale or distribution any ticket, counterfoil or coupon for use in a lottery. This effectively means that a number of other entities such as the shops that sell the product or the magazines that advertise the product could all be prosecuted. In addition, a product recall may also be necessary, so the commercial fall-out could be very damaging.

However, the promoter's work is not finished by merely obtaining a lottery licence via a charity. The terms and conditions of the promotion must be clearly set out and, in particular, any promoter advertising to Irish consumers should make themselves aware of the Advertising Standards Authority for Ireland's Code of standards for advertising, promotional and direct marketing in Ireland, which came into force on 1 January. Although, there are many legal requirements that a promoter must comply with, it is important that entry conditions should be clearly worded and should set out the necessary information that the code requires.

Promoters should also be aware of other legislation concerning advertisements and promotions in Ireland such as the Consumer Information Act 1978. Further laws are also expected to be introduced shortly to clamp down on lottery or prize promotion scams. Promotions have strict legal requirements and, accordingly if you wish to run a promotion, you must make sure you comply with them.

For further information please contact Aine Matthews.


Spring 2007.