Most people think that the difference between a legal lottery and a promotional competition is the size. In reality, there is a very fine line between a legal lottery and a promotional competition. Your competition could be a lottery, which has much stricter requirements.
People are often confused as to whether their competition model falls under the Lotteries Act 57 of 1997 or the Consumer Protection Act 68 of 2008. The Lotteries Act governs lotteries, raffles and sports pools, and seeks to prevent unlawful lotteries and to establish the National Lotteries Fund. The Consumer Protection Act governs promotional competitions and customer loyalty schemes. Both the Lotteries Act and the Consumer Protection Act have limited focus, so it’s important to understand what you can and can’t do.
What is a promotional competition vs legal lottery?
The Consumer Protection Act describes a promotional competition as including any competition, game, scheme or system through ordinary business. This type of competition is intended to promote a producer, distributor or supplier so that they can sell goods or services. Participants don’t need to have any skill to be involved, and they don’t need to pay to enter the competition.
The Lotteries Act describes various types of legal lotteries. More often than not, participants pay to enter these lotteries. These lotteries also don’t promote any members of the supply chain. The most prominent of these lotteries include:
- The National Lottery
- Private lotteries
- Society lotteries
- Lotteries incidental to exempt entertainment
National lottery
The National Lottery is unique. It is the country-wide, government-regulated lottery. The Minister, after consulting with the National Lotteries Board, may give only one licence at a time to a person to conduct the National Lottery.
Private lottery
A private lottery is a very limited form of lottery. It doesn’t mean that you can hold a private lottery just because you are a private person or organisation. To hold a private lottery, the lottery must be run by the people it is for. These can include members of a social or sports club, or people who live or work in the same place. For a private lottery to be legal, the people or club running the private lottery must not be generally connected to any form of gambling. The private lottery must also, amongst other things, advertise the lottery only on their own premises and use all of the funds (apart from reasonable expenses) for prizes or a purpose related to the club’s reason for existing.
Society lottery
A society lottery is broader than a private lottery. A society includes any club, institution, organisation or association of persons, including any separate branch or section of one of these. A society cannot, however, be connected with lotteries, gambling or betting in general. A society lottery must be run only in South Africa, and the society running it must be registered with the National Lotteries Board. Society lotteries must also, amongst other things, use the funds generated for purposes approved by either the National Lotteries Board or (in certain instances) the Fund-Raising Act 107 of 1978.
Lottery incidental to exempt entertainment
A lottery incidental to exempt entertainment is any lottery that appears as part of a social or community event that the Lotteries Act doesn’t govern. This includes a bazaar, sale, fete, dinner, dance, sporting event or other similar entertainment event. For these kinds of lotteries to be legal, the lottery can’t be the main reason for people to attend the event, and prizes must not be in cash. These lotteries must also, amongst other things, make sure that the total ticket value is not more than the amount prescribed by the Minister, and give the proceeds to a deserving section of the public.
What can you do?
The Lotteries Commission has more information about the various types of legal lottery on their website.
We can help you
- draft your private or society lottery terms;
- answer your questions about promotional competitions; and
- draft your promotional competition terms.