Schedule 1 - Betting: Prize Competitions: Definition of Payment to Enter

Gambling Bill – in a Public Bill Committee at 2:45 pm on 11th November 2004.

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Photo of Malcolm Moss Malcolm Moss Shadow Minister, Home Affairs 2:45 pm, 11th November 2004

I beg to move amendment No. 63, in

schedule 1, page 151, line 10, leave out 'includes' and insert 'is'.

Photo of Roger Gale Roger Gale Conservative, North Thanet

With this it will be convenient to discuss the following:

Amendment No. 56, in

schedule 2, page 153, line 3, leave out 'includes' and insert 'is'.

Photo of Malcolm Moss Malcolm Moss Shadow Minister, Home Affairs

Amendments Nos. 63, 56 and the others in the group, if I might call it that—

Photo of Roger Gale Roger Gale Conservative, North Thanet

Order. There are only two amendments in this group, which are amendments Nos. 63 and 56. There are others grouped further on under the schedule. As I usually say at this point, I am perfectly happy to have a wide-ranging debate on the amendments—if that suits hon. Members on both sides of the Committee—as long as it is clearly understood that there will not be a stand part debate afterwards.

Photo of Malcolm Moss Malcolm Moss Shadow Minister, Home Affairs

I am grateful for your directions, Mr. Gale. I simply wanted to alert the Committee to the fact that some of the amendments relate to schedule 1, but that quite a few of the amendments I tabled are to schedule 2. I will discuss them under schedule 1, however. My point is that schedules 1 and 2 are pretty much the same, except that the former refers to prize competitions and the latter to lotteries. The principles that I discuss relate to both but appear first in schedule 1.

Amendment No. 63 is a textual change. It takes out ''include'' and replaces it with ''is'' in order to firm up the three conditions that must be met to participate in the arrangement. The conditions are found in sub-paragraph (a), ''paying money'', sub-paragraph (b), ''transferring money's worth'' and sub-paragraph (c),

''paying for goods or services at a price or rate that reflects the opportunity to participate''.

It has been asked why ''include'' should relate to those conditions when there does not seem to be any other means of making a payment, donation or contribution to participate in the game or lottery. Rather than use ''include'', would it not be stronger to use ''is''? It clearly defines what is really meant.

Photo of Richard Caborn Richard Caborn Minister of State (Sport and Tourism), Department for Culture, Media & Sport

I am afraid that I cannot see any merit in either amendment. They seek to tinker to no good effect with schedules 1 and 2. Although in reality people will be required to pay to enter a betting prize competition, amendment No. 63 would result in the competition falling outside the scope of the regulation if the payment took some form other than those set out in paragraph 2. I cannot forecast what form that would be, but it would be unwise to exclude the possibility of new payment media or mechanisms being developed by the gambling industry.

Although people in reality will have to pay to enter a lottery, amendment No. 56 would result in the lottery falling outside the scope of the regulation if the payment took some form other than those set out in paragraph 2. Again, I cannot forecast what form that might be, but it would be unwise to exclude the possibility of new payment media or mechanisms being developed by the gambling industry.

We are trying to future-proof the provisions as we go through them, and this is yet another example of that. With that, I ask the Committee to reject the amendments.

Photo of Malcolm Moss Malcolm Moss Shadow Minister, Home Affairs

I am grateful for the Minister's explanation, and I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Photo of Malcolm Moss Malcolm Moss Shadow Minister, Home Affairs

I beg to move amendment No. 64, in

schedule 1, page 151, line 13, leave out 'reflects' and insert

'is enhanced or increased in a manner directly attributable to'.

Photo of Roger Gale Roger Gale Conservative, North Thanet

With this it will be convenient to discuss the following:

Amendment No. 65, in

schedule 1, page 151, line 29, leave out 'does not reflect' and insert

'is not enhanced or increased in a manner directly attributable to'.

Amendment No. 57, in

schedule 2, page 153, line 6, leave out 'reflects' and insert

'is enhanced or increased in a manner directly attributable to.'.

Amendment No. 58, in

schedule 2, page 153, line 21, leave out from 'which' to 'and' in line 22 and insert

'is not enhanced or increased in a manner directly attributable to the opportunity to participate in an arrangement.'.

Photo of Malcolm Moss Malcolm Moss Shadow Minister, Home Affairs

Amendments Nos. 64 and 65 refer to schedule 1 and amendment No. 57 refers to schedule 2. The reason that we have tabled them is consistency. Without them, the Government's intention to adopt the so-called New Zealand model could be frustrated or indeed negated. In that model, draws tied to a product promotion do not have to be free to enter as long as the cost of entering them is no more than the cost of the product. Amendment No. 58, relating to schedule 2, would remove the words

''does not reflect the opportunity to enter a lottery''

and replace them with

''is not enhanced or increased in a manner directly attributable to the opportunity to participate in an arrangement.''

The difficulties surrounding the use of the term ''normal rate'' were well aired in the scrutiny Committee, when Susanna Fitzgerald QC and Philip Circus, legal advisers to the Institute of Sales Promotion, gave oral evidence. The issue was covered in detail and their responses are set out in questions 1629, 1630 and 1631 to that Committee. I quote Mr. Circus at the scrutiny Committee:

''It is virtually impossible in the majority of cases to establish what the 'normal' price [for goods] is.''

We concur with that view.

We do not wish to take up the Committee's time by running through the difficulties in defining ''normal price'', but I provide one example to establish the existence of such difficulties. How does one define the normal rate in price of a product that has only just reached the market and, therefore, has no trading history to show that its price was not inflated to cover the cost of running a competition?

The Government's intention in the schedules is clearly to protect consumers from those promoters who openly flout the spirit of those rules that we referred to as the ''New Zealand rules''. It is right and proper that that is done. We think that our proposed revision would help to capture what the Government intend—namely, to ensure that the prices of products are not inflated by unscrupulous operators to cover the cost of running the competition. Therefore, the objective of the amendments is to remove the uncertainty about what constitutes the ''normal rate''

while ensuring that consumers are protected, by making certain that operators of prize competitions cannot artificially inflate the prices of the product to cover the cost of running the competition.

Photo of Richard Caborn Richard Caborn Minister of State (Sport and Tourism), Department for Culture, Media & Sport

Again, I cannot see merit in any of the amendments in this group. I think that they seek to tinker, to no real effect, with schedules 1 and 2. Amendments Nos. 64, 65, 57 and 58 seek to lengthen that part of the definition that covers cases where people have to pay extra for a product to enter a prize competition. The words in the amendments do not make the schedule any clearer—they just make it longer—and, by introducing the concept of direct attributability, they introduce additional and unnecessary complexity and scope for legal argument. The word ''reflects'' in the draft clearly encompasses payments that are announced or increased. With that explanation, I ask the Committee to reject the amendments.

Photo of Malcolm Moss Malcolm Moss Shadow Minister, Home Affairs

We hear what the Minister says. I do not think that he addressed all my points. Those points did not come off the top of my head, but were put to us by QCs who considered the law in this context. While I do not want to prolong the debate, the issue is something that the Minister and his team might reflect on to make sure that their legal advice is spot on.

Photo of Richard Caborn Richard Caborn Minister of State (Sport and Tourism), Department for Culture, Media & Sport

I probably did not give a full enough answer about the expert legal advice that was given to the pre-legislative scrutiny Committee. I return to the point that it is possible for the gambling commission to establish the normal price. If expert evidence is needed, the commission can get that evidence and act on it. In my view, that would be a sensible approach. The fact that such a provision is not included in the Bill is not important because the gambling commission has powers to call for expert advice or evidence and to act on it.

Photo of Malcolm Moss Malcolm Moss Shadow Minister, Home Affairs

That was helpful. We now have it on the record that there is a backstop in the form of the gambling commission. I am grateful to the Minister for those words of clarification. In view of that, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Photo of Malcolm Moss Malcolm Moss Shadow Minister, Home Affairs

I beg to move amendment No. 66, in

schedule 1, page 152, line 6, after 'pay', insert

'the promoter or an associate of the promoter.'.

Photo of Roger Gale Roger Gale Conservative, North Thanet

With this it will be convenient to discuss the following:

Amendment No. 59, in

schedule 2, page 153, line 30, after 'pay', insert

'the promoter or an associate of the promoter'.

Photo of Malcolm Moss Malcolm Moss Shadow Minister, Home Affairs

The amendments refer to similar situations and seek to protect respectable promoters of competitions for which there may be entirely legitimate costs associated with consumers collecting their prize, while ensuring that operators could not possibly benefit financially from such costs. Consumers would still be protected from the type of scam that was described in other places—certainly in

the scrutiny Committee—but also have the opportunity to win worthwhile prizes. Without the amendment, all sorts of meaningful prizes might be outlawed.

By way of illustration and to help the Committee, perhaps I could give some examples. Could a car be offered as a prize if the insurance and road fund licence had to be paid by the winner, or would that scheme be considered a lottery on the basis that payment of the insurance would be regarded as payment to participate? Suppose someone won a competition to go to a concert, perhaps in Sheffield. In order to take possession of their prize—to attend the concert—they must pay the associated costs of travelling to Sheffield, as if they wanted to go there. Would such a competition also fall foul of paragraph 7? Let us say that a person wins a prize by which they get a 50 per cent. discount on something, say a cruise. In order to take possession of their prize—to join the cruise—they would have to pay the other 50 per cent. The consumer may well consider the discount an extremely valuable prize, yet, as I interpret paragraph 7, it may be prohibited.

Those are the issues that have been raised with us. The question is whether the wording is accurate enough to allow for some leeway of interpretation for those prizes, games and competitions that are currently operated but which are not scams and which do not rip off the public in any way.

Photo of Richard Caborn Richard Caborn Minister of State (Sport and Tourism), Department for Culture, Media & Sport

Amendments Nos. 66 and 59 seek to insert a requirement that payment must be made to the promoter or associate of the promoter. I can see no good reason for such a requirement. Paragraph 7 in both schedules covers people who have not yet paid anything, who are told that they have won a prize—typically left vague—and who are then asked to pay to collect it. There have been several schemes of that kind, at best dubious, in the past. People are told that they have won something, which sounds good, and then have to pay much more than the product is worth to collect it.

Against that background, we do not want to leave loopholes for the unscrupulous. I fear that the amendments would do exactly that. They would enable the promoter to set up an arrangement under which payment was not to him but to somebody else, and it would then be a job to prove that that somebody was indeed an associate of the promoter rather than in some other kind of business or relationship. Why make regulation harder than it needs to be? Therefore, the amendment adds nothing, and I ask the hon. Gentleman to withdraw it.

On payment to take possession of a prize, someone who won a car could take possession of it even if they had to pay the car tax to drive it. That is an example of where that may have to be done.

Photo of Malcolm Moss Malcolm Moss Shadow Minister, Home Affairs

I am grateful to the Minister, but he did not deal with the other examples that I gave. Paragraph 7 simply refers to

''a requirement to pay in order to take possession of a prize''.

There could be a wide interpretation of ''pay''. Who is being paid? That is the reason for the amendment's being specific.

Obviously, if the promoter of the competition scam is the one to whom one must give the money, we are quite happy for that situation to be caught in the legislation. However, in the other examples of payments being made, the Bill does not say to whom, it just says ''to pay''. Our amendment is more focused on the recipient of the extra money, who is part of a scam that states, ''You have won a worthless prize but to get it you have to pay a lot more money.'' We are obviously on the side of the Government in wanting to outlaw that practice, but currently valid competitions are running in which there will be a payment of some kind before the prize comes into one's possession. I am not sure that the Minister has addressed that point.

Photo of Richard Caborn Richard Caborn Minister of State (Sport and Tourism), Department for Culture, Media & Sport 3:00 pm, 11th November 2004

We will reflect on that point, but if one pays to collect a prize, what matters to the consumer is the payment, not who gets it. The provision in the Bill is adequate to cover such circumstances, as well as those of a scam. If there is any validity in the argument, I will come back to the hon. Gentleman. As the provision stands, it covers the scam and the genuine payment, but I will revisit the provision with my officials and come back to the Committee if we believe that it is faulty.

Photo of Kevan Jones Kevan Jones Labour, North Durham

Will the Bill outlaw the scam whereby to claim a prize people have to ring a premium rate phone number? Many of our constituents have complained about that, and it needs to be outlawed.

Photo of Richard Caborn Richard Caborn Minister of State (Sport and Tourism), Department for Culture, Media & Sport

Very much so. As my hon. Friend knows, the subject has been raised on the Floor of the House by a number of colleagues. It is, to put it crudely, a rip-off, and that is why the provision is in the Bill. I want to make certain that the wording covers both eventualities—genuine payments and scams. If we believe that it can be worded differently and more strongly to reflect the sentiments expressed by hon. Members, I will consider it.

Photo of Malcolm Moss Malcolm Moss Shadow Minister, Home Affairs

The point is taken on board. We do not seek to allow such scams. We consider them to be covered under the heading of scam situations, and we want to see the Bill as tightly controlled as it needs to be. I am grateful to the Minister for saying that he will take another look at the amendment. It was the result of strong representation from the Advertising Association, representing a large number of members who want clarification. The words that we tabled on their behalf are a means of seeking clarification rather than changing the thrust of the schedule. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Photo of Malcolm Moss Malcolm Moss Shadow Minister, Home Affairs

I beg to move amendment No. 67, in

schedule 1, page 152, line 18, leave out 'neither' and insert 'no'.

Photo of Roger Gale Roger Gale Conservative, North Thanet

With this it will be convenient to discuss the following:

Amendment No. 68, in

schedule 1, page 152, line 19, leave out 'nor less convenient'.

Amendment No. 69, in

schedule 1, page 152, line 19, after 'participating', insert 'in the arrangement'.

Amendment No. 60, in

schedule 2, page 154, line 1, leave out 'neither' and insert 'no'.

Amendment No. 61, in

schedule 2, page 154, line 2, leave out 'nor less convenient'.

Amendment No. 62, in

schedule 2, page 154, line 2, leave out 'entering the lottery' and insert 'participating in the arrangement'.

Photo of Malcolm Moss Malcolm Moss Shadow Minister, Home Affairs

Some of the amendments relate to schedule 2, but others refer to the wording of schedule 1. We feel the need to amend the first half of paragraph 8(1) in both schedules because we believe that it could fly in the face of the Government's intention to introduce the New Zealand model.

To reiterate, that model is one in which draws tied to a product promotion do not have to be free to enter so long as the cost of entering them is no more than the cost of the product. That is because nearly every existing free route could be regarded as less convenient than the purchase route. For example, returning home to register an entry by telephone, or going online to do so, will almost always be less convenient for the consumer than simply purchasing the product on the shelf in front of them. If judges took the same view, it could well frustrate, or even negate, the Government's intention to adopt the New Zealand model in the United Kingdom.

Removing the words ''nor less convenient'' would make the paragraph far more workable in practice, while still allowing the Government to achieve their objectives. An additional benefit of the amendment is that it is technology-neutral because it does not attempt to rank different forms of communication, such as e-mail or phone, by degrees of convenience, because those may well vary according to the individual concerned.

The second half of the paragraph should refer to participating in the arrangement, not entering the lottery, because, as we noted during the debate on an earlier amendment, the Bill will redefine the meaning of ''lottery''. It is therefore more appropriate to speak in terms of an arrangement, not least for reasons of consistency.

Photo of Richard Caborn Richard Caborn Minister of State (Sport and Tourism), Department for Culture, Media & Sport

Again, I cannot see real merit in any of the amendments in this group, which are designed to amend, to no good effect, schedules 1 and 2. Amendments Nos. 67, 68, 60 and 61 would strike out the provision under which a method of entry constitutes a requirement to pay if it is less convenient than entry with payment.

We know that pre-entry routes to competitions are a potential source of abuse. The organisers want people to pay because that is how they make their money, so they offer free-entry routes that are designed in such a way that they attract no one to use them. That mischief is dealt with by the words that the amendments would remove. For example, there could be an opportunity to pay a specific amount to enter a competition, or to deliver the entry by hand between 3 am and 3.15 am on a given day. For some people that might involve no extra cost, but it would

certainly be less convenient than putting a letter in the post. The amendments would allow such scams to flourish.

Amendment No. 69 would add three words that make no substantive change to the clause and are completely unnecessary. Sub-paragraph (1) refers expressly to participation in an arrangement. It is therefore self-evident that subsections (1)(b) and (2) of clause 11 are concerned with the same issue. Amendment. No. 62 would change the word ''lottery'' to the words ''participate in the arrangement''—an unnecessary change. I therefore ask the Committee not to accept it.

Photo of Malcolm Moss Malcolm Moss Shadow Minister, Home Affairs

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 1 agreed to.

Clause 12 ordered to stand part of the Bill.