Competition Rules and the CPA

For many years, businesses have made use of promotional competitions to promote, market and raise awareness for their products and services. But the advent of the Consumer Protection Act impacted on the way these competitions can be run. The implications of the CPA has led to companies having to make fundamental changes to the way they conduct competitions.

Before the CPA, promotional competitions were conducted in terms of the Lotteries Act. This all changed in March 2011, when section 36 of the CPA became effective. Section 36 applies to all promotional competitions conducted in South Africa except if exempted. One example of an exemption would be where the entrants to the competition are all consumers being legal entities with an asset value or annual turnover exceeding R2million.

 

In terms of section 36 of the CPA:

• a “promoter” is a person who directly or indirectly promotes, sponsors, organises or conducts a promotional competition, or for whose benefit a competition is promoted, sponsored, organised or conducted”; and
• a “promotional competition” means any competition that is conducted in the ordinary course of business for the purpose of promoting a producer, distributor, supplier or the sale of any goods or services where the value of any prize offered under such competition exceeds the prescribed threshold (the threshold being R1,00).

From a reading of these definitions, it becomes clear that most competitions fall within the ambit of the Consumer Protection Act.

 

In terms of the CPA, promoters of competitions cannot:

• notify someone that they’ve won a competition if no competition has actually been conducted (a common ploy used by holiday points salespeople!);
• notify a person that they’ve won a competition if they haven’t actually won;
• require someone to do something, pay something, buy something, or fulfil a previously undisclosed condition before they can claim the prize that they’ve allegedly won;
• offer a prize to someone where the same prize is generally offered to other participants;
• charge participants for entering the competition, except for the reasonable costs of posting or submitting their entries (as long as the cost of submission does not exceed R1,50);
• sell products or services that render the participant eligible for the competition at a higher price than the price ordinarily charged for the products and services;
• award a prize to someone who is a director, member, partner, employee or agent of, or consultant to, the promoter;
• award a prize to the supplier of the goods or services associated with the competition.

 

When promoting their competition, a promoter needs to ensure that the participants are aware of the following:

• how to enter the competition;
• when the competition closes;
• how the winner will be identified;
• how the results of the competition will be publicised;
• who the participant can contact to get the results of the competition and generally clarify the competition process and requirements.

 

Another popular provision is to include, as part of the rules of the competition, that the winner:

• is required to post complimentary info about the promoter on their social media feeds before claiming their prize;
• consents to their images being used in the promoter’s marketing material;
• agrees to participate in the promoter’s marketing initiatives;
• be physically present at the time that the draw takes place or when the winners are announced.

Under the CPA, participants need to be given the opportunity to decline their consent to these requirements.

 

In addition, the promoter must ensure that an independent auditor, accountant, attorney or advocate:

• oversees and monitors the competition;
• certifies the lawful conducting of the competition;
• reports his or her findings on the competition through the promoter’s internal auditing process.

 

Further CPA requirements include:

• the promoter must retain all records relating to the promotional competition for a period of three years;
• if the Consumer Commission requests it, the promoter must release its records to the Commission;
• the promoter must have competition rules in place when running promotional competitions.

 

And another thing – failure to comply with the CPA provisions can render your promotional competition null and void. Failure to comply is also a criminal offence which may attract a fine or even imprisonment. Compliance is therefore highly recommended!

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.