This article is about promotional competitions, which are widely used as a form of marketing for goods and services. I do not intend to discuss the church raffle, the national sea rescue draw, or other fund-raising initiatives for non-profit organisations.
What is a promotional competition?
Promotional competitions are regulated by the Consumer Protection Act 68 of 2008 (the “CPA”). To be specific, a competition is a “promotional competition” if it meets the following criteria:
- It must be a competition, game, scheme, arrangement, system, plan or device for distributing prizes by lot or chance.
- The competition must be conducted in the ordinary course of business for the purpose of promoting a producer, distributor, supplier, or association of any such persons, or the sale of any goods or services.
- It will qualify as a promotional competition irrespective of whether a participant is required to demonstrate any skill or ability before being awarded a prize.
- Competitions where all prizes are valued below R1 are excluded.
What are the General Requirements for Running a Promotional Competition?
Section 36 of the CPA sets out the requirements for promotional competitions in some detail, which is further fleshed out in the regulations to the Act. The following are the most important issues to take into account.
A participant in a competition cannot be required to pay any consideration in order to participate in the competition. “Consideration” here includes having to pay more for a particular good or service than the participant would ordinarily have to pay in order to enter the competition. The participant can still be required to pay the reasonable costs of posting or otherwise transmitting an entry. In the case of electronic entries, this amount cannot exceed R1.50.
Certain people who are closely related to the competition promoter, such as directors, employees and consultants to the promoter, cannot be awarded the prize.
Competition rules must be prepared before the competition begins, and must be made available to participants on request.
An offer to participate in a competition must clearly state:
- the competition to which the offer relates;
- what steps must be taken to participate in the competition;
- how the competition results will be decided;
- the closing date;
- the medium that will be used to announce the results, for example by SMS, email or even post;
- how, where and when a participant can get a copy of the competition rules or ultimately claim a competition prize.
This information may be contained either on the medium through which a person participates in a competition, or on a document accompanying it. Alternatively it may be included in any advertisement that draws attention to the competition.
The promoter must ensure that the competition is overseen and certified by an independent accountant, auditor, attorney or advocate, and must keep certain prescribed records of the competition for at least three years.
You will notice that I used the word “medium” above, which is also the term that the CPA uses. For most purposes it does not matter whether the competition is run in an old-fashioned paper-based form, or online. For example it is quite acceptable to advertise a competition using SMS, accept entries and provide the competition rules and other information using a website, and then inform the participant that they have won via email.
So for example where the CPA requires that required information be included on the medium through which a person participates in a competition, or on a document accompanying it, it is quite acceptable to have an entry form on a website, with the required information listed on the same page or accessible via a hyperlink.
In a sense then the title of this article is somewhat misleading, as the rules applicable to promotional competitions generally apply to competitions run using electronic media too. Having said that however, there ARE several issues that you must watch out for if you make use of electronic media in running a promotional competition.
If you advertise the competition using SMS or email, you must be careful not to infringe the various statutes and industry codes dealing with unsolicited commercial messages, better known as “spam”. Take note especially of the WASPA Code of Conduct. WASPA (or the Wireless Application Service Providers’ Association) is an industry body that regulates mobile application service providers in South Africa. Bulk SMS, like those generally used to advertise promotional competitions, is usually sent out by SMS gateway service providers. These service providers will be members of WASPA, and they are bound by the code of conduct to take certain steps to ensure that these SMS advertisements do not amount to spam. If they are found to have sent spam, WASPA may impose a fine, and they may pass this fine on to you.
If you also use SMS shortcodes to, for example, accept entries into a competition, then the competition as a whole will also have to comply with the relevant section of the WASPA Code of Conduct. The Code can be found at www.waspa.org.za/coc/.
The above is a short summary of the most important points relating to promotional competitions, but is by no means exhaustive. For assistance in running a promotional competition and drawing up the terms and conditions, we recommend that you consult with your attorney.