Prize draws and promotional competitions are governed by various laws to try and stop them from being abused or rigged. We help you by providing a checklist for you to follow when running a promotional competition as a way to avoid legal problems, difficulties, and disputes. We also look at adverts relating to promotional competitions, the current legal position and the old position. You can also read about the services we offer relating to promotional marketing.
A checklist for a Prize Draw or Promotional Competition
A checklist of things to bear in mind and a way to avoid legal problems, difficulties, and disputes:
Having competition rules is actually the best way to ensure compliance with the law
- 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.
- Is my competition an unlawful lottery or competition in terms of section 56 of the Lotteries Act?
- Is it now irrelevant whether it complies with section 54 of the Lotteries Act and the regulations?
- Is the competition is promotional competition under the Consumer Protection Act? If no, then the Consumer Protection Act is irrelevant.
- Does it comply with section 36 of the Consumer Protection Act? For example, is “any consideration to be paid by or on behalf of any participant in the promotional competition, other than the reasonable costs of posting or otherwise transmitting an entry form or device“? If the answer is yes, then you may have a problem.
- Do you have competition rules? The law requires each promoter to prepare, make available and retain competition rules for each promotional competition. Having competition rules is actually the best way to ensure compliance with the law – by having rules that comply with the law you have made a good start. We can draft competition rules for you.
- Are there any other relevant laws that must be complied with? The Fund-Raising Act 107 of 1978 is sometimes of relevance especially where people are asked to make a contribution as part of the competition (like donate an old coat and get a discount off a new one). So is the Nonprofit Organisations Act, 1997. This Act repeals the Fund-Raising Act, with the exception of its chapter two which deals with Disaster & Relief Funds. You can read a guide to the Nonprofit Organisations Act, 1997 by clicking here. It is sometimes necessary to register a nonprofit organisation with the department of social development.
- Does your advertising of the promotional competition comply with applicable law and the Code of Advertising Practice? For example, section 36 requires that various things are stated in any offer to participate. For example, the closing date of the competition.
- Are you processing the personal information of participants lawfully. The Protection of Personal Information Act has been enacted and you should ensure that the manner in which you deal with the personal information of participants is in accordance with POPI. Relevant wording should be included in the rules.
- Are there any competition law issues related to running the competition?
If you are interested, please complete the form on the right or enquire now. We will contact you to find out more about your requirements and give you a quote.
The new position (after 1 April 2011)
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”.“.
The old position (before 1 April 2011)
Promotional competitions were 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 were authorised under the Lotteries Act. A promotional competition was 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 had to comply with:
- section 54 of the Lotteries Act that set out the circumstances under which a promotional competition was lawful; and
- the Regulations that contained various regulations relating to promotional competitions.
The problem was that both section 54 and the regulations were very badly drafted and it was very difficult to interpret them and therefore comply with them. An example of a crazy unintended result was the following. People were worried that if prizes were distributed purely by lot or chance, then their promotional competition might be seen to be an unlawful lottery. Therefore, many promotional competitions required 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 this is no longer required.