We have a winner

Provisions of the Consumer Protection Act to consider when conducting a promotional competition.

What is a promotional competition?

A “promotional competition” is defined in section 36(1)(d) of CPA to mean any competition, game, scheme, arrangement, system, plan or device for distributing prizes by lot or chance if – 

• 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 
• any prize offered exceeds the threshold prescribed by the member of Cabinet responsible for consumer protection matters (the threshold is currently R1.00),

irrespective of whether a participant is required to demonstrate any skill or ability before being awarded a prize. 

What qualifies as a prize? 

A prize is defined in section 36(1)(b) of the CPA to include a reward, gift, free goods or services, price reduction or concession, enhancement of quantity or quality of goods or services, or other discounted or free thing.

Accordingly, if a competition is conducted in the ordinary course of business, for purposes of promoting a producer, distributor, supplier, or association of any such persons, or the sale of any goods or services, and the value of the prize associated with the competition exceeds R1.00, the requirements in section 36 of the CPA must be met by the promoter of the competition. 

Who is a promoter? 

A promoter is defined in section 36(1)(c) of the CPA to mean a person who directly or indirectly promotes, sponsors, organises or conducts a promotional competition, or for whose benefit such a competition is promoted, sponsored, organised or conducted. 

What are the obligations of the promoter?

The CPA imposes various obligations and restrictions on the promoter of a promotional competition. 

Section 36(3)(a) of the CPA provides that a promoter must not require any consideration to be paid by or on behalf of any participant in the promotional competition, other than the reasonable costs of posting or transmitting an entry form or device. As a result, promoters may not require participants to pay any amount (directly or indirectly) to access the promotional competition. Where participation in the promotional competition requires the purchase of any goods or services, the promoter may not charge a price higher than the price ordinarily charged for those goods or services (or similar goods or services). 

The CPA also imposes restrictions on the awarding of prizes, and provides, in section 36(3)(b), that a promoter must not award a prize:

• if it is unlawful to supply those goods or services to that prize winner; or
• to any person who is a director, member, partner, employee or agent of, or consultant to the promoter, or any other person who directly or indirectly controls or is controlled by the promoter, or a supplier of goods or services in connection with the promotional competition. 

A promoter is also required, in terms of the CPA, to prepare competition rules prior to the beginning of any promotional competition. These rules, generally referred to as the competition terms and conditions, must be made available to the National Consumer Commission and to any participant on request, and must be retained for a period of at least three years following the end of the promotional competition.

Are there any marketing restrictions?

The CPA requires an offer to participate in a promotional competition to include details of the benefit or competition to which the offer relates; the steps for entry; the basis on which the results will be determined; the closing date for the promotional competition; the medium through which the results will be announced; and, the person from whom, the place where and the date and time at which a person may obtain a copy of the competition rules, and a prize winner may receive a prize. 

An offer to participate in a promotional competition in the form of an advertisement must be published during the time of the promotional competition and in the area in which the promotional competition is conducted. The advertisement must draw attention to and be clearly associated with the promotional competition. 

Regulation 11 of the Consumer Protection Act 68 of 2008 Regulations (“Regulations”) provides that where a set of competition rules requires the prize winner to permit the use of his or her image for marketing purposes, or requires him or her to participate in any marketing activity or attend at the draw or announcement of the winners of the competition, the rules must afford the prize winner with an opportunity to decline such an invitation (and inform the prize winner of their right to do so). Failing which, the relevant provision of the competition rules will be rendered null and void.  

What documents must be retained? 

Sub-regulation 11(6) of the Regulations sets out a list of information and documentation that must be retained by a person who conducts a promotional competition. 

The list is extensive, and includes, inter alia, a copy of the offer to participate in the promotional competition; the names and identity numbers of the persons responsible for conducting the promotional competition; a representative selection of material marketing the promotional competition; a list of all instances when the promotional competition was marketed (including details of the dates, the medium used and the places where the marketing took place); a signed acknowledgement of receipt of the prize signed by the winner, together with his or her identity number and the date of receipt of the prize; declarations made under oath or affirmation by the person(s) responsible for conducting the promotional competition, confirming that the prize winners were, to the best of their knowledge, not prohibited winners in terms of section 36(3)(b)(ii), or the spouses, life partners, business partners or immediate family members of such persons; and many more requirements. 

What is our role?

Sub-regulation 11(5) of the Regulations provides that the promoter must ensure that an independent accountant, registered auditor, attorney or advocate oversees and certifies the conducting of the promotional competition. 

For assistance in certifying the conducting of promotional competitions, compliance with the CPA and its accompanying Regulations, or for more information on the subject, please do not hesitate to contact our offices.