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1 Nov 2019

House raffle ads found to be 'misleading'

Raffle House offered entrants the chance to win a London home, but a much lower-value cash prize was awarded

Three new complaints against property raffle company Raffle House have been upheld by the Advertising Standards Authority (ASA), which ruled that entrants had been misled by the advertising.

Raffle House has already been criticised by many after its first competition saw the winner receiving a cash prize of less than 50% of the final profits, rather than the London flat that had been advertised.

With a second 'win a property' competition launched in August, Raffle House has now been dealt another blow by the ASA. The regulator concluded that the company had acted in a misleading way and that the prize awarded in the first raffle was 'not a reasonable equivalent' to the property that had been advertised.

Which? carried out an investigation into Raffle House in August, questioning why the winner of the first competition received a £173,013 cash prize rather than a £650,000 property.

Here, we explain what the latest ASA ruling could mean for future house raffles.

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Why have people complained about Raffle House?

All marketing material published in the UK is regulated by the ASA, which is tasked with enforcing the UK Code of Non-broadcast Advertising, Sales Promotion and Direct Marketing - also known as the Cap Code.

Ahead of this most recent ruling, the ASA had already upheld two complaints against Raffle House in May 2019, after the company changed the competition's entry method and failed to include the competition's closing date on one of its Facebook ads.

The latest ruling deals with a further three complaints the ASA received, regarding Raffle House marketing that described two promotions offering the opportunity to win a house.

The ads in question were an email that featured text stating: 'With three weeks to go, our data shows that we're now only about 6,500 entrants away from being able to guarantee the property as the prize!'; a blog post on Raffle House's website that explained how the first competition's cash prize had been calculated; a sponsored Facebook post that said 'Be in with the chance of calling a £500,000 London property your home in 2020! Our previous winner, [winner's name], had her life changed through Raffle House, will you be next?'

The complaints boiled down to two main issues:

  1. That the first competition quoting a prize of a £650,000 flat, or a reasonable equivalent, had not been awarded
  2. The Facebook ad misleadingly implied that the winner of the first competition had won a house of similar value to £500,000.

What did Raffle House say?

Raffle House has disputed both issues.

Of its cash prize, it argued it 'was a reasonable equivalent given the significantly reduced odds it was won at'. Raffle House also says customers were informed of how many entrants were required to guarantee the property as the main prize, and that all entrants had agreed to the terms and conditions which stated the cash prize would be 50% of the ticket sales, minus charity donations and other fees.

It also said that none of its later advertising said that the previous winner had won a property, and that the words 'this is absolutely life-changing for me' were directly quoted from the company's blog post describing the winner's opinion of her prize.

Raffle House is currently running a competition to win a flat in Whitechapel, which has been valued by a third party at £500,000.

Benno Spencer, founder of Raffle House, said: 'We're now less than 20,000 entrants away from our 60,000 ticket threshold and confident that we'll be awarding our current property in three months.'

What does the ruling say?

In recent years, the ASA has issued guidance on its website specifically for 'win a house' promotions. One of the requirements is that 'prizes must be awarded as described in the ad, or a reasonable equivalent'.

As part of Which?'s investigation, we pointed out that a past competition by Homeraffler.com awarded its winner the value of the tickets sold minus a 15% 'administration fee' - which, again, was found by the ASA not to be a reasonable equivalent of the luxurious property advertised as the prize.

In its ruling the ASA acknowledged that any competition that needs to generate a certain amount of revenue before it can give away the advertised prize is likely to breach the Code if it doesn't sell the required number of tickets. However, it ruled that Raffle House's advertising did not make clear what would happen if the minimum number was not reached.

An ASA spokesperson told us: 'While our rules do not prohibit the advertising of legitimate property raffles, advertisers must ensure they do not mislead entrants. Our rules also state that the prize awarded must be as described in the ad, or a reasonable equivalent (of the same nature and value as the prize advertised).'

What will happen as a result of the ASA's ruling?

While the ASA is able to rule against an advert, it doesn't have the power to fine companies for breaching the code.

As part of its ruling, the ASA told Raffle House to ensure the prizes being awarded are 'as described in marketing communications or reasonable equivalents', and that any future advertising should not 'mislead by exaggerating the value of a prize that had previously been awarded'. These instructions relate to current and future advertising.

The terms and conditions of Raffle House's current competition state that if the minimum number of tickets isn't sold and a cash prize is awarded, Raffle House will keep 25% of the cash, and any promotional costs and overheads, charitable donations, and payment processor and acquiring bank fees will again be taken out of the winner's prize pot.

Should I enter a property raffle?

As long as you're not hanging all your hopes of becoming a homeowner on a raffle, they can be a bit of fun - much like the lottery.

Before taking a punt on a competition to win a house, though, there are a few things you should consider:

  • Past cases have seen unscrupulous ticket sellers disappear without paying a penny: you should always check to see how professional the competition looks, whether there are contact details for the company or seller, and whether the property actually exists according to the Land Registry.
  • It's extremely rare for a raffle to award the property as the prize: to Which?'s knowledge, it's only happened once in the UK, back in 2017. Since then, housing raffle competitions have either been shut down by the UK Gambling Commission (UKGC) for failing to comply with gambling laws, or have failed to sell enough tickets and awarded a lesser cash prize.
  • House raffles can fall between the cracks of regulation: no regulatory body is solely responsible for holding these kinds of competitions to account. The UKGC has no jurisdiction over prize draws, the ASA is restricted to looking at competitions' marketing material, and Trading Standards is yet to get involved in these kinds of enterprises.
  • Read the terms and conditions carefully: the competition's smallprint may hold information about circumstances that could leave you with a tax bill to pay, or a much lesser prize than you were expecting. Make sure you're fully clued up before you hand over your cash.

If you're keen to buy a property of your own, you may be better off focusing on mortgage deposit.