Competitions are often great tools for marketing a company and their brand. We see it all over social media and hear them on the radio. It is clear that competitions work because who wouldn’t want to win a competition? As a brand, it is even more exciting to run a competition and see the traffic and sales on your social media page or website increase. If you are looking to run a competition, here are a few things to keep in mind.
If you want to run a promotional competition for your business, section 36 of the Consumer Protection Act (“CPA”) and regulation 11 of the Consumer Protection Regulations (“Regulations”) may apply requiring you to comply with their requirements for your competition to be lawful and valid. If you fail to adhere to the legal requirements set out in the CPA and the Regulations, your competition will be considered unlawful.
What is a promotional competition?
According to section 36 of the CPA, a promotional competition is defined as any competition, game, scheme, arrangement, system, plan, or device for distributing prizes by lot or by 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 sale of any goods or services; and
- Any prize offered exceeds the threshold prescribed in terms of section 36 (11), irrespective of whether a participant is required to demonstrate any skill or ability before being awarded a prize.
The definition above extends to a reward, a gift, any free goods and services, price reduction or concession and enhancement of quantity or quality of goods and services.
The section goes on to define a promoter of a competition. The CPA broadly defines a promoter as a person who directly or indirectly promotes, sponsors, organizes, or conducts a promotional competition.
Simply put, if you run a business with the aim of garnering more customers, then the competition is a promotional competition in terms of the CPA and your business will be considered the promoter.
A raffle, however, is not considered a competition because the aim is not to get more customers to come support your business but for fundraising purposes.
What are your duties/obligations as a promoter of a competition?
As a promoter you cannot expect a participant to pay a fee just to enter the competition. However, you can ask entrants to buy a product or service first to participate in the competition. The price for the product or service must not be more than what customers would usually pay for the product or service.
You must have competition rules in place before the competition is made public and running. As the competition is subject to the CPA, the rules must be fair, just, and reasonable. Furthermore, you are required to make the rules available to the National Consumer Commission and to any participant requesting such for free. A copy of the rules must be kept for a minimum of 3 years post competition.
You must not require entrants to be present at a draw or be part of marketing for the competition and/or business. The entrant must be given the choice to accept such an invitation or reject the invitation to be part present at the draw or participate in the marketing for the competition and/or business. Forcing a participant to join in the above means your competition is unlawful and void.
Your competition must clearly disclose all relevant information for the competition to all participants, such as:
- the prize that is up for grabs;
- How entrants can enter the competition;
- How the winner will be determined, and how it will be communicated to all who entered the competition including the winner;
- Where the winner can receive the prize; and
- Where any person can obtain a copy of the competition rules from the promoter.
Bear in mind that if you want to run a competition, you are required in terms of regulation 11(5) of the Regulations to appoint an independent expert to oversee and audit your competition and its rules. The independent expert can either be an accountant, registered auditor, attorney, or advocate.
The independent expert will compile a report for you about your competition and thereafter, you will be required to keep that report for a minimum of 3 years post competition.
What are you not allowed to do as a promoter?
Apart from running an unlawful and illegal competition, you cannot inform a person that they won the competition if no competition has been conducted. You cannot subject the prizewinner to another condition in order for them to collect their prize.
You cannot award a prize to a winner if it is unlawful to supply those goods or services. Meaning, a prize winner cannot win a firearm and an under 18-year-old cannot win alcohol.
For fairness and transparency, certain people cannot win a competition. For instance, a director, member, partner, employee, agent, consultant, supplier of the business or any person who is directly or indirectly controls or is in control of the business cannot be a prizewinner.
To sum it up
If you want to run a competition to expose your business to a greater audience, it is in your best interest as a business owner to be mindful of the legal requirements of section 36 of the CPA. It is also in your best interest to be mindful of the other provisions in the CPA and the Regulations that may apply. If you would like to know a bit more or need any legal assistance and advice, Legalese is here to hold your hand through the process.
– Rushni Ebrahim