If you’re looking to promote a business through running a promotional competition, you will need to know about the types of promotional competitions you can run. You will also need to know how the law regulates those types of promotional competitions. What are the different types of promotional competitions? Some promotional competitions are based on luck, where the outcome is based on chance, and others are based on skill. If you don’t understand the difference between the two, and you also don’t understand how the law regulates them, you risk running an illegal lottery or promotional competition, which your organisation will definitely not benefit from.
What is an unlawful promotional competition?
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 Consumer Protection Act governs promotional competitions and customer loyalty schemes. Entrants don’t need to have any skill to be involved, and they don’t need to pay to enter the competition. These competitions include any competition, game, scheme or system done through the ordinary business of the promoter. This type of competition is intended to promote a producer, distributor or supplier so that they can sell goods or services. The Consumer Protection Act also requires you to advertise accurately, make your competition rules accessible, and provide all other relevant information to your entrants, including entry and closing dates.
The Lotteries Act governs lotteries, raffles and sports pools, and seeks to prevent unlawful lotteries and to establish the National Lotteries Fund. What’s quite important, irrespective of whether your proposed competition is based on luck or skill, is to not charge entrants money to enter. Charging entrants money makes your proposed competition an unlawful lottery. The Lotteries Act describes various types of legal lotteries. More often than not, participants pay to enter these lotteries. 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.
Types of promotional competitions – luck or skill?
Where you select a winner using a lucky draw, the competition is one based on chance.
As long as your selection of the winner is random, it does not make a difference whether you used a program to achieve that or assigned numbers to each entrant and put those numbers into a jar and randomly selected the winner. You must:
- have clear and understandable competition terms;
- appoint an independent auditor to oversee the draw, and you need to keep the auditors’ reports and affidavits after the competition;
- let entrants know how you will select a winner, and that your competition is based on chance; and
- also clearly advertise how many winners you will have and not make it sound like all entrants will get a prize.
Your competition is based on skill if you require your entrants to pass some sort of test. An example of such a test is if you require them to answer questions, create and submit songs, pictures, or perform tricks in order to stand a chance to win. The judging process is very important in these types of competitions. The Wireless Application Service Providers’ Association (WASPA) has a code which requires you, for example, to still select a winner even if you didn’t get the desired number or quality of entrants. If you use mobile services (such as an SMS competition) as part of running your promotional competitions, you need to know what the code is, because it applies to you.
How can we help you?
We can help you run your promotional competition in accordance with the law from start to finish by:
- drafting your private or society lottery terms;
- answering your questions about promotional competitions;
- drafting your promotional competition terms; and
- auditing the competition and providing you with a report that certifies that your competition complies with the CPA.
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