Online Legal…

The law relating to promotional competitions is currently a mess. Luckily, with the new Consumer Protection Act on its way this will no longer be the case and we will have some certainty.  I look at the old position, the new position, adverts relating to promotional competitions and provide a checklist for you to follow when running a promotional competition as a way to avoid legal problems, difficulties, and disputes.

The position before 24 October 2010

Promotional competitions are governed by section 54 of the Lotteries Act 57 of 1997  and the regulations regarding promotional competitions published under GN R672 in GG 24874 of 16 May 2003.  Promotional competitions are authorised under the Lotteries Act.   A promotional competition is defined in the Lotteries Act as:

“a lottery conducted for the purpose of promoting the sale or use of any goods or services“

and lottery was defined in the Lotteries Act as:

“includes any… promotional competition or device for distributing prizes by lot or chance and any game, scheme, arrangement, system, plan, competition or device, which the Minister may by notice in the Gazette declare to be a lottery“.

In order for a promotional competition to be lawful it has to comply with:

1. section 54 of the Lotteries Act that sets out the circumstances under which a promotional competition is not unlawful; and
2. the Regulations that contain various regulations relating to promotional competitions.

The problem is that both section 54 and the regulations were very badly drafted and it is very difficult to interpret them and therefore comply with them.  An example of a crazy unintended result is the following.  People are worried that if prizes are distributed purely by lot or chance, then their promotional competition might be seen to be an unlawful lottery.  Therefore, many promotional competitions require a participant to demonstrate some skill or ability before being awarded a prize.  For example, to win the prize you have to answer the following question:

Which country on the Southern tip of Africa do you live in?

A bit silly and it detracts from the promotional competition. Luckily we now have clarity and in future this will not be required.

The position after 24 October 2010

Promotional competitions are now dealt with under section 36 of the Consumer Protection Act.  A promotional competition will mean:

“any competition, game, scheme, arrangement, system, plan or device for distributing prizes by lot or chance if-

(i) it is 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; and

(ii) any prize offered exceeds the threshold prescribed in terms of subsection (11),

irrespective of whether a participant is required to demonstrate any skill or ability before being awarded a prize.“

So, no more silly questions, unless there is a marketing reason for them.

Adverts in respect of promotional competitions

The Code of Advertising Practice applies to all commercial advertising including:

“all advertisements for the supply of goods or services or the provision of facilities by way of trade, and also to advertisements other than those for specific products which are placed in the course of trade by or on behalf of any trader“.

Included in the definition of advertisement in the Code is any advertisement “which is intended to promote the sale, leasing or use of any goods or services; or appeals for or promotes the support of any cause“.  The general provisions of the Code will therefore apply to advertisements in respect of a promotional competition and you must therefore be satisfied that your advertisements comply with the requirements of the Code.   You must therefore be satisfied that it is honest and truthful and not in any way false or misleading and that it is not an imitation of any other advert.

In respect of the advertising of competitions, the Code specifically provides that “(i) the Advertising Standards Authority may in respect of any advertisement for a competition require that substantiation, in the form of acceptable legal advice that the competition is legal, be furnished and (ii) the value of the prizes referred to in the advertising must include VAT”.“.

A checklist

A checklist of things to bear in mind when running a promotional competition and a way to avoid legal problems, difficulties, and disputes:

Having competition rules is actually the best way to ensure compliance with the law

1. Is there a subscription in respect of the competition?  If there is no subscription (as defined in the Lotteries Act) in respect of  your competition, then the Lotteries Act does not apply and your competition is not unlawful.
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