Finally we have a comprehensive piece of legislation that regulates the position of promotional competitions with the commencement of the Consumer Protection Act 68 of 2008 (the “CPA”) on the 1st of April 2011.

In order for you and your company (the “Supplier”) to avoid legal issues, disputes and costly litigation in the future it is imperative that the Supplier understands and fully acquaints themselves with the law regarding adverts relating to promotional competitions and confidently tick all the required checklist boxes when facilitating a promotional competition.

THE POSITION BEFORE THE COMMENCEMENT OF THE CPA
In the past prior to the commencement of the CPA, promotional competitions were governed by Section 54 of the Lotteries Act 57 of 1997 (the “Lotteries Act”). Previously a promotional competition was defined as: “a lottery conducted for the purpose of promoting the sale or use of any goods or services” and lottery was defined as: “including 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”.

Therefore promotional competitions had to comply fully with Section 54 of the Lotteries Act and the Regulations that set out the circumstances under which a promotional competition was lawful. However the Lotteries Act, specifically Section 54 and the Regulations were poorly drafted and almost impossible to interpret and comply with.

THE POSITION AFTER THE COMMENCEMENT OF THE CPA
Section 36 of the CPA and Regulation 11 now regulates the position with regards to promotional competitions. A promotional competition in terms of Section 36(1) is: “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) by the Minister, irrespective of whether a participant is required to demonstrate any skill or ability before being awarded a prize.”

IMPORTANT TO REMEMBER WHEN ORGANISING A COMPETITION!

• For purposes of section 36(3)(a) of the CPA, the reasonable cost of electronically transmitting an entry for a competition shall not exceed R1.50.

• Any provision in the rules of a promotional competition requiring the prize winner to:

(a) permit the use of his or her image in marketing material; or
(b) participate in any marketing activity; or
(c) be present when the draw is taking place or the winners are announced, without affording him or her the opportunity to decline an invitation to do so or informing him or her of the right to decline such an invitation, is null and void.

• The monetary threshold of prizes for the purpose of excluding competitions with low value prizes from the definition of promotional competition for purposes of section 36(11)(a) of the CPA Act is currently R 1.00.

• The promoter must ensure that an independent accountant, registered auditor, attorney or advocate oversees and certifies the conducting of the competition and must report this through the promoter's internal audit reporting or other appropriate validation or verification procedures.

• For purposes of section 36(11)(b) of the CPA and subject to sub-regulation (5), the person who conducts a promotional competition must, for a period of at least three years, retain –

(a) full details of the promoter, including identity or registration numbers, as the case may be, addresses and contact numbers;
(b) the rules of the promotional competition;
(c) a copy of the offer to participate in a promotional competition contemplated in section 36(5) of the CPA;
(d) the names and identity numbers of the persons responsible for conducting the promotional competition;
(e) a full list of all the prizes offered in the promotional competition;
(f) a representative selection of materials marketing the promotional competition or an electronic copy thereof, but such copy must be easily accessible in a generally available format;
(g) a list of all instances when the promotional competition was marketed, including details on the dates, the medium used and places where the marketing took place;
(h) the names and identity numbers of the persons responsible for conducting the selection of prize winners in the promotional competition;
(i) an acknowledgment of receipt of the prize signed by the prize winner, or legal guardian where applicable, and his or her identity number, and the date of receipt of the prize, or where this is not possible, proof by the promoter that the prize was sent by post or other electronic means to the winner using his or her provided details;
(j) declarations by the persons contemplated in paragraph (d) made under oath or affirmation that the prize winners were to their best knowledge not directors, members, partners, employees, agents or consultants of or any other person who directly or indirectly controls or is controlled by the promoter or marketing service providers in respect of the promotional competition, or the spouses, life partners, business partners or immediate family members;
(k) the basis on which the prize winners were determined;
(l) the summary describing the proceedings to determine the winners, including the names of the persons participating in determining the prize winners, the date and place where that determination took place and whether those proceedings were open to the general public;
(m) whether an independent person oversaw the determination of the prize winners, and his or her name and identity number;
(n) the means by which the prize winners were announced and the frequency thereof;
(o) a list of the names and identity numbers of the prize winners;
(p) a list of the dates when the prizes were handed over or paid to the prize winners;
(q) in the event that a prize winner could not be contacted, the steps taken by the promoter to contact the winner or otherwise inform the winner of his or her winning a prize; and
(r) in the event that a prize winner did not receive or accept his or her prize, the reason for his or her not so receiving or accepting the prize, and the steps taken by the promoter to hand over or pay the prize to that prize winner.

For further legal advice regards the above please do not hesitate to contact us for practical assistance and remember it is important when organising a competition to consider the above rules in totality to avoid falling short of the CPA.

Written and prepared by: Claire Vogelpath-de Iongh, email claire@bkm.co.za

Please do not hesitate to contact us on +27 11 788-0083 should you have any further enquiries or email enquiries@bkm.co.za “BKM Attorneys - Passionate about Law”