Requirements for Promotional Competitions

Business

There’s nothing like a competition to raise the spirits. As they say, you’re not in it until you’re in it. But when you are in it, that’s when things start happening. The palms go clammy, the anxious knots eat at your stomach, and your nerves are all a-jitter. Your head computes that your chances of winning are even lower than your chances of your boss tripling your salary with immediate effect. Yet still, the ticket in your hand ignites a small flame of hope as you plead with your chosen deity to select your number out the hat. The challenge is that if there’re no promotional competition rules your entry might not even be legal.

 

Broadly speaking, there are two types of competitions: competitions involving skill and competitions involving luck. Many people are unaware that if the outcome of a competition depends on luck, there are legal requirements that need to be considered. The Consumer Protection Act regulates the conducting of luck-based competitions – and failure to comply is a criminal offence.

 

Section 36(1)(d) defines promotional competitions as “any competition, game, scheme, arrangement, system, plan or device for distributing prizes by lot or change if it is conducted in the ordinary course of business for the purpose of promoting a product, distributor, supplier, or association of any such persons, or the sale of any goods or services, and the prize exceeds the threshold prescribed.” For those who read this definition closely and got excited by the reference to “threshold”, the threshold is set at R1,00, so unless your prize is less than a buck, you have little chance of escaping the CPA provisions.

 

Here are some of the limitations that the CPA places on promotional competitions:

  • You cannot inform someone that they have won a competition, but then require them to pay something, buy something or do something before they can claim the prize.
  • You cannot require the entrant to pay to enter the competition. Section 36(3)(a) provides that the promoter of a competition may not require “any consideration to be paid 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.” You can, however, require the entrant to post or SMS confirmation of their entry into the competition.
  • You cannot award a prize if it illegal to supply the recipient with the goods. Eg. you cannot give a prize containing alcohol to a minor.
  • The promoter of a promotional competition cannot award a prize to someone who is employed by the promoter. This is loosely defined to include directors, members, partners, employees, agents and consultants. The prize can also not be awarded to the person who supplies the prize.
  • The Consumer Protection Act requires you to have promotional competition rules. These rules must be made freely available to the Consumer Commission and must be retained for three years after the competition.
  • The promotional competition rules must clarify such items as: the process the entrant must follow to enter the competition; the basis on which the competition will be decided; the closing date of the competition; the medium through which results will be announced; details about where and when a person can get the results of the competition, or receive a prize.
  • If you include a requirement that the entrant or winners must: permit the use of their images in marketing material; participate in marketing initiatives; be present at the time that the winner is announced, then you must give the entrant the opportunity to decline.
  • Section 11 (5) of the Regulations to the CPA require that an independent attorney, advocate, auditor or account oversees the results of the competition

 

In short, promotional competitions can be a remarkably effective way of promoting your products and services. But before you embark on this exciting initiative, make sure you have your Promotional Competition Rules in place and that you’ve complied with the Consumer Protection Act’s requirements for running the competition.

 

Please note that this information is supplied for general information and does not constitute legal advice. It is advisable for you to contact a legal practitioner for guidance in respect of your unique requirements.

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