Feature: Promotions under siege?

Marketers would do worse than think that their industry was under siege. New regulations came into force on April 1st 2007 prohibiting the marketing of most food and drinks to pre-school and primary children and they will be extended to under 16s in 2008.

The Gambling Act makes some major changes from September 1st 2007 to the way in which competitions and prize draws can be run. The changes will have a big impact on the Call TV industry which is already reeling from the imposition of tough new laws from ICSTIS, the premium rate phone regulator.

And it does not stop there. The EU has recently passed the Unfair Commercial Practices Directive and this will be incorporated into UK laws and codes by the end of the year.

The fact remains that even with these rules, the UK has the most liberal regulatory regime for sales promotion in Europe. In Ireland, to run a prize draw by mail or SMS, you need to secure the help of a registered charity and pay them so that, from a legal point of view, they become the promoter of your campaign.

In Spain all games of chance including instant wins must be registered. This not only involves a fee of about 10% of the prize fund but also multiple registrations in each of the many autonomous regions of Spain.

It is a similar situation in Italy, where a permit from the Finance Ministry is required for a promotion and where prizes are involved the promoter must deposit with them a sum of money equivalent to the prize fund, just in case they were tempted not to award the prizes in the end!

Is all this increased regulation a backlash to a morally and ethically bankrupt marketing community? Or are tighter controls something that the industry should embrace as a way of ensuring that the interests of the consumer are protected from some of the sharper practices of some of the sharper companies in each industry?

Those in the Call TV industry have known of its issues for years but they’ve done nothing about it, preferring instead to just take the money. Last month’s lead story in this magazine suggested that the GMTV type A,B or C question that charges for entry may be an illegal lottery, but it has been running for years. Also, there are examples of sustained bad practice even in the world of FMCG. An ASA survey of on pack promotions found that 26% of promotions checked failed to meet the administration standards of the CAP Code. They “all fell down because the promoters were not able to demonstrate that prize draws were conducted, or instant win prizes distributed, under the supervision of an independent observer.” And we all know of competition winners who have been picked from the pile rather than judged, rejected because “they lived too far from the airport “ or instant win packs held back to allow for the advertising to run before the prize on offer is won.

So what can we do to avoid further legislation and impositions on our creativity?

The simple answer is to do the right thing – ensure that CAP Code is applied to your promotions in both the letter and the spirit. This Code reflects all that a reasonable consumer would expect of a promoter and is clearly laid out in easy to read languages. Contact the ASA on 020 7 292 2222 or www.asa.org.uk to order a copy. Plus use the adjacent checklist to ensure that you have got the basics right.

GETTING THE BASICS RIGHT :

Terms and Conditions – Checklist. But always seek expert advice before committing to print etc All significant decision making information should be provided at the time of sale/ entry. For these basics, it is not sufficient to leave it to “terms and conditions available upon request” :

Closing Date

Any restriction on the number of entries or prizes that may be won

Any requirements of proof of purchase

Clear description of prizes and any limitations / restrictions

Any age, or other restrictions

How and when winners will be notified and results published

The criteria for judging entries

Where appropriate, the ownership of copyright of entries

Whether and how entries are returnable by the promoter

How full rules can be obtained

If any cash alternative is available

Any permissions required – eg parent or employer

Any intention to use winners in post-event publicity

The name of the promoter and address

Is the entry form sensibly designed for data input and with clear entry instructions Ideally the consumer should be able to keep a set of terms and conditions once they send in the application form. Does it meet Data Protection requirements – with appropriate opt in or outs, and clearance from mail/phone preference lists etc?

Additional requirements for Competitions

Have you stated the criteria for judging, are they clear, practical and specific or loose and woolly?

Have you appointed an independent and competent judge? Have you budgeted for the cost of physically dealing with all entries?

What is the procedure for dealing with more than one correct entry – i.e. is there a tie-breaker?

Additional requirements for Prize Draws

If a purchase is implied via an on-pack promotion, have you included a statement that no purchase is necessary? It should be as prominent as any other method of entry.

How will the NPN be run – via regular draws or at end of promotion?

Plus that it has to have the same chance of winning in an independently supervised draw.

What controls are there on the handling house to ensure that it is handled correctly with no “loss” of winners or transfer of data?

Will the draws be conducted by an independent person or body?

Additional requirements for Instant Wins

Instant Wins require a lot more consideration and care – but crucially until the start of the Gambling Act, they need a free entry route and this and the distribution and seeding of winning packs must be independently supervised.

How will the NPN be operated – via a random number generator, in which case allow for risk of incremental prizes? Or by opening actual promotional packs, in which case allow for the cost of wastage?

Have you ensured that only the correct amount of winning tokens have been produced – no more, no less?

Have they been randomly and securely seeded into the main production run?

Is there an independent audit statement to this effect – as required by the code?

For free advice on any aspect of judging, seeding and drawing contact PromoVeritas :jeremy@promoveritas.com 020 7 060 0232

THREAT TO THE WORD “FREE” .

The Unfair Commercial Practices Directive comes into force in April 2008 and, in the words of the EU itself, it is hoped that “EU consumers will be given the same protection against aggressive or misleading marketing whether they buy locally or from other Member States' markets. Businesses will benefit from having a clear set of common EU rules to follow, rather than a myriad of divergent national laws and court case rulings, as is currently the case.” Specifically it seeks to ban unfair, misleading and aggressive business practices. These include:

False or deceptive statements relating to key product factors

Omission of material information

Use of coercion or undue influence

Providing false or untruthful information

Such activities are to be illegal if they are likely to deceive the average consumer and are likely to cause him to take a transactional decision, i.e. purchase that he might otherwise have not taken.

And it also prohibits 31 other specific offences including:

Bait and Switch type advertising

Limited offers – Today Only

Adverts disguised as editorial

Pyramid schemes

And of major concern to marketers: “Falsely creating the impression of free offers - describing a product as free or without charge or similar or the consumer has to pay anything other than the unavoidable of responding to the offer and collecting or paying for delivery of the item. For example, an ad in a mail order catalogue states that you will receive a free pair of sunglasses, when in fact this only applies to persons ordering other products from the catalogue!”

JUST WHO IS INDEPENDENT?

The CAP Code clearly requires promoters to ensure that there is independent conduct, audit or supervision of prize draws, text & wins, instant wins and competitions. But just who is independent? Can you get the factory manager to insert those winning tickets, or the handling house to select the prize draw winners? The answer according to a February 2007 briefing from the CAP Sales Promotion & Direct Response Panel is no. They sought to define the "independence of Prize Draw observers". And this is the view “In addition to the usual and obvious exclusions e.g. employees and agencies, the Panel agreed that the definition of an independent observer should exclude anyone who either had a contractual relationship with the promoter or worked for a company that had a contractual relationship with the promoter. This definition would not exclude people or companies paid a fee to act as independent observers provided they could demonstrate their independence”. As Stewart St Clair Pearce, Commercial Director of PromoVeritas Ltd says, “this is a welcome announcement as it clarifies the situation and should ensure that consumers are offered more and better protection through the use of genuine independent verification services such as o