Promotional competitions have become a common feature of South African retail and marketing campaigns.
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Companies that offer consumers entry into prize draws through till slips, app promotions and similar competitions are set to face closer scrutiny as regulators tighten oversight.
The National Consumer Commission (NCC) and National Lotteries Commission (NLC) this week signed a memorandum of understanding aimed at coordinating investigations, enforcement and complaint referrals involving lotteries, sports pools and promotional competitions.
The agreement potentially affects companies that promote their businesses through “buy-and-win” competitions, SMS or USSD entry competitions, app-based giveaways, fast-food promotions and similar campaigns.
According to the regulators, the agreement will cover “compliance, investigation and enforcement initiatives to curb lotteries, sports pools and promotional competitions that contravene the Lotteries Act and/or the Consumer Protection Act”.
The NLC states on its website that “promotional competitions are a form of lottery”, although they are regulated under the Consumer Protection Act rather than the Lotteries Act.
The regulator has also warned that illegal lotteries can include “any game of chance” not authorised under the Lotteries Act.
In a University of Pretoria LLM thesis, Olivia Lindhorst noted that promotional competitions may become unlawful if consumers are effectively paying hidden or inflated entry costs through product purchases linked to competitions.
Lindhorst also noted that promotional competitions were moved under the Consumer Protection Act in 2011 because they are widely used in ordinary retail and marketing activity, not just gambling environments.
According to legal guidance published by Michalsons Attorneys, promoters are required to disclose competition rules, prize details, closing dates and winner-selection processes, while retaining records relating to competitions.
Michalsons Attorneys notes that promoters are businesses offering prizes exceeding R1 in the ordinary course of business.
The NLC has previously said it investigated competitions “run as promotional competitions, but not in compliance with requirements of the Consumer Protection Act”.
The new agreement between the NCC and NLC also includes joint seminars, workshops, training, information-sharing and referrals between the two regulators.
The regulators said they would develop a framework for classifying complaints to ensure matters are directed to the correct authority.
NLC commissioner Jodi Scholtz said the agreement was “long overdue”. Scholtz said "as the regulator of the National Lottery and Sports pools, the Lotteries Act requires the Commission to conduct its business with integrity and to protect all participants".
NCC acting commissioner Hardin Ratshisusu said the regulators would collaborate “on all matters relating to lotteries, sports pools and gambling to curb non-compliance with our respective statutes to ensure consumers are protected”.
The NCC said the agreement would provide a framework for cooperation on matters relating to “the regulation of lotteries, sports pools and gambling”.
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