Promotional competitions have recently come under the spotlight as companies such as First National Bank and Vodacom have been taken to task for running promotional competitions in contravention of the Lotteries Act.
FNB’s Million-a-Month case
FNB conducts the “Million-a-Month” competition to promote its Million-a-Month, 32-day-notice savings account. Every R100 deposited into a customer’s account gives the customer one entry into a monthly draw to win a R1-million cash prize. The customer earns minimal or no interest and doesn’t pay any account fees.
Vodacom’s 100 BMWs in 100 days competition
The National Lotteries Board recently declared Vodacom’s “100 BMWs in 100 days” competition unlawful in terms of the Lotteries Act. Vodacom subscribers entered the competition by sending an SMS to a specifi ed number at a cost of R10 per SMS.
Entrants stood to win a BMW in a random daily draw. In addition, the entrant who submitted the most SMSs in a particular week won a BMW that weekend. Vodacom ended the competition after the Lotteries Board declared it unlawful.
Rules for promotional competitions
The Lotteries Act makes it unlawful to conduct, for business purposes, a competition other than a promotional competition, in which success does not depend to a substantial degree on skill. A “promotional competition” is essentially a lottery or competition in which prizes are distributed by lot or chance, and which is conducted for the purpose of promoting the sale or use of goods or services. In order for a promotional competition to be lawful, it must meet the requirements set out in the Lotteries Act and the regulations under that Act. For example, promotional competitions must comply with rules relating to the minimum age of the participants, the nature of the prizes which can be won, and persons who are prohibited from participating in promotional competitions. legally speaking
There is also a string of rules concerning the consideration payable for the purchase of products or the use of services in respect of which a promotional competition is conducted, which, in essence, provide that an entrant may not be charged to participate in a promotion competition.
There are rules about the price of a product or service in respect of which a promotional competition is conducted:
Ã¢Â€Â¢ It may not be higher than the usual price ordinarily paid for that or a similar product or service;
Ã¢Â€Â¢ It may not be increased by the opportunity to participate in the promotional competition;
Ã¢Â€Â¢ It must be the only consideration payable for that product or service and must include the consideration for the right to compete.
In addition, the opportunity of participating in a promotional competition must not be the only substantial inducement to a person to purchase or use the goods or services to which the promotional competition relates.
FNB and Vodacom contravened the rules
The Pretoria High Court declared the Million-a-Month competition unlawful in terms of the Lotteries Act for several reasons, including the fact that customers had to sacrifice a higher interest rate for a chance to win the prize. FNB has appealed the decision.
Similarly, the Lotteries Board declared the 100 BMWs in 100 days competition unlawful. The Lotteries Board was quoted in the media as saying that “a promotional competition in which the cost of an entry is more than a normal SMS is illegal”. And that “if the person who participates in a promotional competition is paying for the prizes, then it is a lottery and will be illegal”.
In the light of the court’s decision in the FNB case (pending the outcome of the appeal), the participants should not be required to pay for the right to compete by sacrificing any benefit they would have had in the absence of the right to participate in the competition.
Wendy Rahamim is a director and Tebogo Mthiyane is an associate at Werksmans Attorneys.
Ã¢Â–Â This column first appeared in !_LT_EMThe Media!_LT_/EM magazine.