PROMOTIONAL COMPETITIONS AND THE CONSUMER PROTECTION ACT

THE LEGAL REQUIREMENTS FOR RUNNING PROMOTIONAL COMPETITIONS

In the age of social media marketing, the running of promotional competitions is often used by many businesses as a means to marketing and branding a business on various social media channels.

But before you go ahead and post that promotional competition of Facebook, have you considered whether there are any legal requirements that regulate how your competition needs to be run? I have, and here’s a brief outline of what you need to know.

The Consumer Protection Act, No. 68 of 2008 and its Regulations (the “CPA”) is presently the main piece of legislation regulating the running of promotional competitions. In this blog, I will deal with the legal requirements of running promotional competition under the CPA. I will also touch on the Protection of Personal Information Act (“POPI”), which will also have an impact on the personal information collected through running your competition. Depending on the type of promotional competition to be run, there might be other legislation that needs to be complied with, and legal advice should therefore be taken to ensure that your competition is legally compliant before you start.

THE CPA REQUIREMENTS FOR PROMOTIONAL COMPETITIONS

Promotional competitions are dealt with under section 36 of the CPA. Section 36 defines a number of key terms relating to promotional competitions, as set out in the table below.

Definitions in Section 36 of the CPA:

1.  ‘‘Participant’’ means a person who enters, competes in or is otherwise    eligible to win a promotional competition.

2.  ‘‘prize’’ includes a reward, gift, free good or service, price reduction or concession, enhancement of quantity or quality of goods or services, or other discounted or free thing.

3.  ‘‘Promoter’’ means 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.

4.  ‘‘promotional competition’’ means any competition, game, scheme, arrangement, system, plan or device for distributing prizes by lot or chance if:

(i)  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

(ii)  any prize offered exceeds the threshold prescribed in terms of subsection (11),

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

5.  The threshold referred to in the definition of “promotional competition” above, has been set at R1.00 (one Rand).

The Promoter of a promotional competition may 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 otherwise transmitting an entry form.

The Promoter is also prohibited from awarding a prize to a competition winner if it’s unlawful to supply those goods or services to that prize winner (for example alcohol to a person under the age of 18) or if the prize winner is any person who is a director, member, partner, employee or agent of, or consultant to the Promoter, any other person who directly or indirectly controls or is controlled by the Promoter, or a supplier of goods or services in connection with that competition.

The Promoter must ensure that competition rules are prepared before the beginning of the competition, these competition rules must accompany or be available on the competition entry page.

An offer to participate in a promotional competition (i.e. the competition entry page itself or the competition rules linked to the competition) must be in writing and must state what the benefit of the competition is, the steps to be taken by the Participant in order to participate in the competition, the closing date for the competition, how the results of the competition will be determined, how the Participants will be informed of the results, the details of a contact person (or contact email address)  where Participants can request further details of the competition and a copy of the competition rules.

The following provisions are not permitted in the competition rules:

  • a provision that permits the Promoter to use the prize winner’s image in marketing material without the prize winner being given the opportunity to decline the use of his/her photo;
  • a provision that requires the prize winner to participate in any marketing activity without being given the opportunity to decline or a provision that does not advise the prize winner of his or her right to decline;
  • a provision that requires the prize winner to be present when the draw is taking place or when the winners are announced, without further stipulating that the prize winner has the right to decline such an invitation.

Auditing requirements for promotional competitions under the CPA

The Promoter must ensure that an independent accountant, registered auditor, attorney or advocate oversees and certifies the conducting of the competition and must report this through the Promoter’s internal audit reporting or other appropriate validation or verification procedures.

Record-Keeping Requirements and Document Retention for promotional competitions

A Promoter must retain certain information relating to the promotional competition for a period of 3 years. Some of the information to be retained includes relevant details in respect of the Promoter, the competition rules, whether an independent person oversaw the determination of the prize winners and, if so, his personal details, the details of the prizes and prize winners and the steps taken where a prize winner did not receive or refused to accept his or her prize. Full details of the information to be retained can be found in Regulation 11(6) of the CPA Regulations.

The National Consumer Commission can request the Promoter to provide it with a report, based on the documents and material that’s the Promoter is required to retain, at the Promoter’s expense.

HOW POPI WILL IMPACT THE RUNNING OF PROMOTIONAL COMPETITIONS

Once the Protection of Personal Information Act, No. 4 of 2013 (“POPI”) comes into effect, it will apply to all the personal information that is collected and processed by the Promoter from the Participants through the running of the promotional competition. The legal requirements of POPI will therefore need to be reviewed and considered by the Promoter to ensure that it complies with POPI. Among many other legal requirements of POPI, the competition rules will need to set out what the purpose of collecting the Participants personal information will be, what will their personal information be used for, and contain a consent provision by the Participant, authorising the Promoter to use and process the Participants personal information in the manner defined in the competition rules.

CONCLUSION

The Consumer Protection Act contains a number of provisions that need to be complied with when running a promotional competition. Many of these requirements will be complied with through the competition rules, and it is therefore important that Promoters have well drafted competition rules that encompass all the requirements of the CPA.

It is also recommended that the portal through which the competition is entered, should have a tick box for Participants to confirm that they have read and agree to the competition rules before they enter the competition. This will ensure that all Participants had access to the competition rules on entering the competition.

The information retention requirements of the CPA are important and the Promoter must ensure that it collects and retains the information and documentation required by the CPA for the required 3 year period.

Finally, in terms of the CPA, the promotional competition needs to be overseen and certified by one of the professionals stated above. This professional should oversee the competition winner selection, in order to certify the validity of the winner selection and then provide the Promoter with a report or document confirming that the competition and winner selection was overseen by him/her.

Jansenn Attorneys can assist you with developing your competition rules, provide the required competition oversight and provide you with advice on the full document retention requirements needed for your competition. Contact us for assistance or view our Services to see how we can assist your business will all of its commercial law needs.