INTEGRATED: INTEGRATED ISSUES; Test-case casts doubt on use of premium- rate phone lines

Entering a competition by telephone may count as a bet, Kate MacMillan says

Entering a competition by telephone may count as a bet, Kate MacMillan

says



Premium-rate telephone lines are an essential part of an agency’s

armoury when it comes to setting up competitions for clients. However, a

test-case being brought by Customs and Excise against News International

has left a question mark over their use.



The case, due to be heard in the High Court at the end of this month,

centres on a raft of fantasy dream team competitions that ran in the Sun

in 1994.



The competitions all had simple entry procedures - readers selected the

members of their dream football team and placed a six-minute premium-

line telephone call to register their choice.



Fairly standard practice you might think. But shortly after the

competitions were published, Customs informed News International it

would have to pay 37.5 per cent betting duty on all revenue from the

premium-line calls. These calls, it argued, constituted bets under the

1981 Betting and Gaming Duties Act because readers paid money for a

chance to win, and so they were liable for duty.



The hearing is the second round in a battle which could run for years.

News International scored a victory when a VAT tribunal found that the

calls constituted an entry charge, not a bet.



The forthcoming case in July is Custom’s appeal against the tribunal’s

decision, and, if it loses again, it is expected to refer the matter to

the Court of Appeal.



‘This is a test-case,’ one industry source says. ‘If it sets a

precedent, Customs can go after the myriad of other companies running

similar competitions.’



So what advice should agencies give clients while this case moves

through the courts?



One route which many agencies are adopting is to steer clear of premium

lines until the issues have been resolved. Carolyn Odgers, an account

director at Leo Burnett, typifies this school of thought. ‘This case has

made me stop and think. There are a million other things we can do, so I

would be cautious about this technique until I see the outcome,’ she

says.



Others argue that this reaction is alarmist. David Hall, the commercial

manager at J. Walter Thompson, says: ‘The case does raise questions that

lower people’s confidence in the technique but we have to remember that

there are legitimate ways it can be used. We just need to take more

care.’’



Easily said, but what does this actually involve? Hall’s approach has

been to follow two basic rules. First, he avoids using 0891 numbers for

entry when the competition involves an element of chance. ‘I always

guarantee a reward to people making the call, even if it’s just a bendy

toy or some other small prize.’



Hall also points out that there is no legal difficulty in using 0891

lines in competitions when you’re providing people with information.

‘What you have then is just a straightforward transaction. The person

taking part may be paying money to BT for a phone call rather than

handing over cash, but the principle is the same.’



Before following Hall’s approach, it is probably worth seeking advice

from a professional body. The Newspaper Society met with Customs and

thrashed out concessions for its members on the use of premium-rate

lines before the News International case reached the tribunal. These

concessions outline circumstances under which premium-rate calls can be

used in competitions without incurring duty.



So, a third option is to simply carry on using premium lines following

the News International model. As Hall points out, this strategy may be

viable. But if you take this route, make sure you make provision for

37.5 per cent betting duty in the budget. If Customs wins, it can demand

backdated duty for up to six years.



Ultimately, the solution to the issues raised by this case will be to

lobby for changes in the law. Mary Russell, a solicitor at the Newspaper

Society, says: ‘This is part of the larger issue that there is too much

regulation in the area of lotteries and amusements, stifling legitimate

commercial activity.’



NEWS INTERNATIONAL VERSUS CUSTOMS AND EXCISE



1994: News International runs Fantasy Football competitions in the Sun

newspaper



October 1995: News International challenges Custom’s decision to levy

37.5 per cent betting duty at a VAT tribunal and wins



July 1996: Customs to challenge tribunal’s decision in the High Court



1996-97: If Customs loses the test-case this month it is expected to

take the matter to the Court of Appeal



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