Young people gambling, texting and the Gambling Act

19/08/2004

With some businesses uncertain about cellphone text competitions, the Department of Internal Affairs wants to ensure that if businesses run text competitions, they do so legally.

The Director of the Department of Internal Affair’s Gaming and Censorship Regulation Group, Keith Manch, said that, to help protect children and teenagers, the Gambling Act has banned almost all forms of gambling using cellphones. This can have implications for text competitions.

The reasons for the ban are that modern technology can allow easy access to 24-hour a day instant gambling via cellphones, and children and teenagers are very high users of cellphones.

The immediate danger of such gambling is that young people, and others, are less likely to know how much money they are losing when it appears that no money is changing hands, i.e. the losses are charged to a telephone account or at times a credit card. Long term, and potentially more seriously, the younger people are when they start gambling the more likely they are to develop gambling problems.

In addition, gambling is licensed in New Zealand as a form of community fundraising only and not as a commercial venture for a business. The only exceptions Parliament has allowed to this rule are the six casinos.

Text competitions

The Act allows businesses to operate gambling via cellphone when it is a legitimate sales promotion in the form of a lottery. Sales promotions do not require a gambling licence.

The Department is advising businesses that are considering running text competitions to get professional, independent legal and financial advice to ensure that they can structure the promotions legally. Relevant provisions include, but are not limited to:

• the Act’s definitions of gambling, lotteries, sales promotions and remote interactive gambling (section 4)
• gambling prohibited (section 9)
• advertising overseas gambling prohibited (section 16)
• sales promotion schemes authorised (section 18)
• offences (section 19).

Issues to consider about sales promotions include, but are not limited to:

• a sales promotion requires a person to buy goods or services at no more than their usual retail price (e.g. buy sunscreen and go in the draw to win a holiday)
• if a communications device such as a cellphone is used, the sales promotion can only be a lottery (i.e. each entry represents a chance to go into a draw and the draw decides the winners)
• a participant must not have to pay additional costs (normal costs of mailing or texting a sales promotion entry are acceptable). A text sales promotion that charges a higher than normal rate for text messaging will not be legal.

It is important to keep in mind that the Act, as its name states, is about gambling. Unless gambling is involved, it does not prohibit using a cellphone to pay for goods or services or take part in a poll. The characteristics of gambling are:

• it involves chance, e.g. a random draw, or a wager on the outcome of a sporting event
• participants pay to enter
• there are prizes of goods, services or money for the winning entrants.

Telecommunications companies and broadcasters can breach the Act if they are involved in an illegal text competition. Examples include, but are not limited to:

• A telecommunications company or a broadcaster cannot run a text competition where the only thing people do is send a text to a particular number to have the chance of winning a prize. The only purpose of the text is going in the draw, and no goods or services are being offered. In the Department’s view, this is not a sales promotion, and the company would be operating illegal gambling for its own profit.
• If a telecommunications company offered free entry to a lottery for every, for example, five texts sent to any numbers at the usual price, then this would be a legal sales promotion. The service is texts to friends or for business, and there is no additional cost to enter.
• Where a sales promotion includes texts that cost more than the usual price, then the sales promotion is illegal. A company cannot increase the cost of the text messaging to cover the cost of running the sales promotion.

Text-based competitions can take many forms. Whether any individual competition is legal depends on the specific facts of that example. Two of the questions that promoters should always ask themselves are:

• Is the competition a form of gambling? If it is not, then the Act does not apply.
• If it is a form of gambling, is it a sales promotion? If it is not, then it is probably illegal. If it is a sales promotion, then the organisers must ensure they meet the requirements of the Act.

Get professional, independent legal and financial advice

The Department is more than happy to communicate with organisations to explain its role and what the law states. It will always respond according to the provisions of the Gambling Act. However, it is not a legal or financial advisor and does not give legal opinions or business advice.

While the Department will provide as much information as it can, it is the responsibility of organisations’ management and boards to make business decisions about how they will structure their promotions and invest their, and their shareholders’, money.

This media release is not a substitute for legal or financial advice.

Media contacts:

Keith Manch
Director Gaming and Censorship Regulation Phone 04 495 9449, Cellular 027 445 6420

Vince Cholewa
Communications Advisor Phone 04 495 9350, Cellular 027 272 4270

Business contact:

The Department’s Operational Policy, Kate Reid, would be a useful contact for businesses considering text-based sales promotions. Her e-mail is kate.reid@dia.govt.nz