Costly 'prizes' firms breach EU law, judges rule

Companies tantalising consumers with “prizes” which then cost money to claim or use are breaching EU law, judges ruled today.

Such "aggressive" trading is outlawed even if claiming the prize costs only the price of a postage stamp, said the European Court of Justice.

The verdict is a victory for the UK's Office of Fair Trading in a test case against Purely Creative and four other companies specialising in offers by mail or in newspaper advertising.

Whether the prize at stake was of little or high value, such offers break EU laws on "unfair business-to-consumer commercial practices in the internal market" if the prize winner incurs any cost at all, said today's ruling.

The Office of Fair Trading took UK legal action but the Court of Appeal sent the case to the Luxembourg judges to clarify whether the EU rules - part of the UK's Consumer Protection from Unfair Trading regulations since 2008 - ban schemes which involve even a small cost to consumers claiming prizes.

Today's judgment in Luxembourg said: "EU law prohibits aggressive practices which give the consumer the impression that he has already won a prize, while he is obliged to pay money or incur a certain cost in order to be informed of the nature of that prize or to take certain action to acquire it.

"The court makes clear that such practices are prohibited even if the cost imposed on the consumer is minimal (such as that of a stamp) compared with the value of the prize or where it does not procure the trader any benefit.

"In addition, those aggressive practices are prohibited even if a number of methods are offered to the consumer in order to obtain the prize and even if one of those methods is free of charge."

The ruling explained: "EU law seeks to protect consumers' economic interests by prohibiting companies from adopting commercial practices which are unfair to consumers.

"It prohibits, amongst other things, companies from creating the false impression that the consumer has already won, will win, or will win on doing a particular act, a prize or other benefit, when in fact taking any action in relation to claiming the prize or other equivalent benefit is subject to the consumer paying money or incurring a cost."

The judges cited cases where consumers received individually-addressed letters, or were offered scratchcards or saw "advertising inserts" in papers and magazines informing them that they had won a prize or other benefit, whether of significant or symbolic value.

The "winner" was offered options for discovering the exact prize and getting a claim number - from dialling a premium rate telephone number, using a texting service or sending a letter. Call costs were given, but consumers were not told that the promotions company received a share of such costs.

The judges singled out one promotion offering a Mediterranean cruise: "In order to receive that prize, the consumer had to pay the insurance, a supplement to obtain a one-bed or two-bed cabin and, during the voyage, the cost of food and drink, plus the port fees.

"Thus, two couples would have had to pay £399 per person in order to participate in that cruise."

Purely Creative's website says the company devises a wide variety of games which are carried in all leading UK and Irish newspapers and magazines. In 25 years the company has paid out more than £7 million in cash prizes as well as luxury family holidays and other goods and vouchers.

"We want everyone who takes part in one of our games to thoroughly enjoy the experience and be happy with the outcome" says the website.

PA