Not just fun & games: What the CMA’s online prize draws & competitions study means for businesses & consumers

The UK’s online prize draws and competitions (“PDC”) market has expanded rapidly in recent years, offering consumers the chance to win high-value prizes - from cash and electronics to vehicles and luxury goods - via both paid and free entry routes.

However, this growth has prompted increasing scrutiny around transparency, fairness, and consumer protection.

In response, the Department for Culture, Media and Sport commissioned a market study led by the Competition and Markets Authority (“CMA”) to assess the sector’s scale, identify potential harms, and evaluate the case for regulatory intervention.

What are PDCs?

PDCs typically allow participants to enter prize draws either for free or by paying a fee. Common prizes include cash, electronics, vehicles, clothing, and household items. Some operators also donate a portion of proceeds to charity.

To avoid classification as gambling under the Gambling Act 2005, PDCs often include a free postal entry route or a skill-based question. This enables them to operate outside the scope of gambling legislation. Nonetheless, PDC operators remain subject to general UK consumer protection laws and the Advertising Standards Authority’s (“ASA”) UK Code of Non-broadcast Advertising and Direct & Promotional Marketing (“CAP Code”), which govern marketing practices.

Key findings

The CMA found that transparency across the PDC sector is inconsistent. Many operators fail to disclose essential information, such as the odds of winning, winner selection processes, or the amount donated to charity. Free entry routes are often poorly advertised, and there is limited clarity between instant win and main draw products, particularly regarding odds and mechanics.

These shortcomings risk eroding consumer trust and exposing individuals, especially vulnerable consumers, to misleading practices. Unclear prize conditions or hidden costs may lead to financial loss or unrealistic expectations.

While consumer sentiment appears generally positive (61% of participants believe advertisements accurately reflect prizes and entry conditions, and nearly half feel well-treated by operators) these figures mask deeper issues. Since 2018, the ASA has upheld numerous complaints involving misleading odds, unclear deadlines, and obscured free entry routes. The Gambling Commission and Citizens Advice have also received hundreds of complaints, particularly concerning deceptive practices on social media.

These findings suggest that despite low levels of overt dissatisfaction, inconsistent transparency and enforcement gaps expose consumers to harm and highlight the need for stronger, more targeted protections.

The CMA’s study also touches on gambling-related risks and potential impacts on the lottery sector. However, this article focuses specifically on consumer protection and advertising transparency within the current legal framework.

The case for reform:

The CMA outlines three potential regulatory responses:

• bringing PDCs under Gambling Commission oversight, potentially requiring licensing and age verification
• enhancing enforcement of existing advertising and consumer protection rules, empowering regulators like the ASA to proactively monitor and penalise non-compliance
• introducing a voluntary industry code of conduct, similar to the approach taken with loot boxes

Given this article’s focus on consumer protection and advertising transparency, the second and third options are particularly relevant. These are discussed in more detail below.

Stronger enforcement of existing consumer protection rules

One potential measure is to strengthen enforcement of current consumer protection regulations. This could involve more proactive oversight by regulators such as the ASA, particularly in relation to misleading advertising, unclear entry mechanisms, and retrospective changes to prize conditions. We believe that giving the ASA more meaningful enforcement power would significantly support the broader goal of strengthening consumer protection. At present, the ASA lacks the authority to impose real sanctions, which undermines the effectiveness of the CAP Code and allows repeated breaches to go largely unchecked.

Voluntary code of conduct

Another option is the introduction of a voluntary code of conduct for PDC operators, akin to the framework developed for loot boxes. Such a code could promote higher standards of transparency and responsible marketing. However, its effectiveness may be limited by low uptake and inconsistent adherence - especially given the sector’s fragmented nature and the absence of a central industry body. Oversight could potentially fall to the ASA.

Regardless of whether the CMA adopts any of these measures, the study signals a likely shift in the regulatory landscape and increased scrutiny of how operators comply with advertising standards and consumer protection laws.

What this means for businesses

Businesses operating or partnering with PDC providers should proactively review their compliance frameworks, particularly around advertising standards and consumer rights:

• review marketing practices to ensure alignment with the CAP Code, wider consumer protection laws and ASA and CMA guidance
• reassess terms and conditions for clarity, fairness, and accessibility
• monitor regulatory developments, including any legislative or enforcement changes