If any part of your business involves running competitions, you will sooner or later have to familiarise yourself with the provisions of the Lotteries Act, No 57 of 1997 (“the Act”). Although the Act was promulgated in 1997, the sections that have the biggest impact on the way in which businesses run competitions came into effect only this year.
Before dealing with the Act, the first question anyone conducting a competition should ask themselves is: will this competition fall within the ambit of the Lotteries Act? Section 1 of the Act defines ‘a lottery” as including: ‘any game, scheme, arrangement, system, plan, 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.”
From this definition, it appears that the manner in which prizes are awarded is the primary factor in determining whether or not a competition falls within the definition of a lottery. The key element of this definition is the distribution of prizes ‘by lot or chance.”
What then of competitions requiring an element of skill or ability from participants? Again, it seems that regardless of any skill required to participate in the competition (like answering a series of questions or writing a poem), the ultimate determining factor will be the way in which the prizes are awarded. If this process involves an element of chance, the competition will most likely have to comply with the requirements of the Act.
Once it has been established that a competition meets the Act’s definition of a lottery, you then have to find out what kind of lottery it is. The Act provides for a number of different types of lotteries or competitions and different provisions are applicable to each. Most businesses will be conducting what is referred to in the Act as a promotional competition, defined as: ‘a lottery conducted for the purpose of promoting the sale of or use of any goods or services.”
From the definitions which have been discussed above, we can distil the following – if you are conducting a competition which involves the award of prizes by lot or chance, and is aimed at promoting your goods or services then, in order to be lawful, your competition will have to meet the requirements set out in the Act, particularly in Section 54. This section deals specifically with promotional competitions and came into operation on 2 May 2003. We don’t have the space to go into a detailed analysis of the provisions of this section, but will discuss briefly the main requirements that must be met for the conduct of a lawful competition. Here are some of the requirements:
The price of goods or services cannot be increased by the opportunity to participate in a promotional competition and must be the price ordinarily paid for the goods or services;
The opportunity of participating in a competition should not be the only substantial inducement to purchase the goods or use the services;
The competition must be conducted in accordance with the regulations prescribed by the Minister;
The competition must not be substantially similar to any competition, game or sports pool conducted by or on behalf of the national lottery.
It is this final requirement that has drawn the most criticism. It is not clear at this stage how the words ‘substantially similar” will be interpreted, but the concern is that in an over-zealous attempt to safe-guard the national lottery, this provision will be relied on to prohibit a range of competitions.
The regulations set out the nuts and bolts of the way in which a competition should be conducted. The regulations deal with issues like the minimum age of participants, the maximum value of prizes in any calendar year, the maximum number of prizes in any calendar year, the nature of the prizes, the frequency, duration and maximum number of promotional competitions to be run in a calendar year. The regulations also set out the penalties for any contravention.
While Section 54 and the regulations were being finalised, businesses were able to conduct competitions in a fairly unregulated environment, but since both the Act and the regulations came into effect in May this year such will not be the case for competitions conducted in future. It would be advisable prior to the conduct of any competition that legal advice is sought to ensure that the competition complies fully with the Act.
Karen Willenberg is an attorney with Rosin Wright Rosengarten, a firm specialising in entertainment and media law based in Johannesburg.