A promoter’s legal compliance checklist

The CPA replaced the repealed Lotteries Act 57 of 1997 and became effective on 1 April 2011. Section 36 of the CPA imposed the stringent definitions of a “promoter” andpromotional competition”, which includes competitions where prizes can be won regardless of whether a participant shows any skill or ability. Given these rather wide definitions and the very low-value threshold of R1.00 prescribed in terms of Regulation 11(4) of the CPA Regulations, it is clear that the vast majority of competitions conducted in South Africa from 31 March 2011 will be governed by the CPA.

Promoters, including promoters of SMS or MMS competitions, will be in contravention of the CPA where:

  • they indicate that a participant has won a competition if no competition has been conducted, the person has, in fact, not won the competition or the person is required to meet a previously undisclosed condition or to pay a further sum of money in order to receive the prize; or
  • a participant is informed that he has a right to a prize when, in fact, he does not have such right, where the prize was generally offered to other similar participants, or where the participant is required to pay a further amount for the prize or to purchase any goods or services.

Crucially, section 36(3) requires that a promoter should “not require any consideration to be paid by… any participant… other than the reasonable costs of posting or… transmitting an entry” and Regulation 11(1) specifies that the “reasonable cost of electronically transmitting an entry shall not exceed R1.50”.

A promoter would similarly fall foul of the CPA, where he requires participants to make payment for the opportunity to participate in the competition or where he requires the purchase of any goods or services and the price charged for those goods or servicesis more than the price… ordinarily charged for those or similar goods or services without the opportunity of taking part in (the) competition”.

For the purposes of ensuring fairness, the CPA requires that a promoter may not award a prize to any person who is a director, member, partner, employee or agent of, or consultant to, the promoter or to the supplier of any goods or services in respect of the competition.

Practical Requirements

A promoter should ensure that his invitation for participants to take part in his competition includes details on:

  • how a participant should accept the invitation to participate;
  • how the results will be determined;
  • the competition’s closing date;
  • the means by which the results of the competition will be made public; and
  • the person from whom or the place from where a copy of the competition rules may be obtained.

The promoter will be deemed to have satisfied these requirements if this information is available directly on the medium through which a person participates in the competition, on a document accompanying any medium or in any advertisement which is published, and which draws attention to the promotional competition.

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

  • permit the use of his image in marketing materials;
  • participate in any marketing activity; or
  • be present when the prize draw takes place, or the winners are announced,

without offering him the opportunity to decline such requirement, will be null and void.

The Regulations also require the promoter to ensure that certain specified professional persons oversee and certify the manner in which the competition was conducted and report his/her findings through the promoter’s internal audit reporting or validation and verification procedures. There is also a strict requirement regarding record keeping for a period of 3 years.

Non-compliance by promoters of the provisions of the CPA and its Regulations may result in the competition being declared void and in contravention of the CPA. The imposed offences under the CPA range from a fine or imprisonment (or both) for a period not exceeding 10 years or a fine or imprisonment (or both) for a period not exceeding 12 months or to both, depending on the severity of the contravention. In addition, administrative fines imposed by the Tribunal in respect of prohibited or required conduct is particularly onerous as such fines are set at the greater of 10% of the guilty party’s annual turnover during the preceding financial year or R1 million.

Conclusion

Promoters of promotional competitions and, in particular, competitions conducted using SMS or MMS technology, should ensure that they are aware of the various requirements and obligations placed upon them by the CPA. Great care should be taken when conducting competitions which will fall within the realm of the CPA as and from 31 March 2011, since the Commission and the Tribunal are likely to take a very dim view of promotional competitions which do not comply with the requirements of the CPA and its Regulations.

Reference List:

  • The Lotteries Act 57 of 1997
  • The Consumer Protection Act 68 of 2008 and its Regulations
  • Naudé T & Eiselen S, Commentary on the Consumer Protection Act, Juta, 2014

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE).