If you are a promoter of a competition, then chances are that the CPA is likely to apply to that competition. It is important for the promotor to know when a promotional competition is regulated by the CPA and to comply with its requirements in order to avoid the risk of incurring penalties. This article will examine the relevant provisions in the CPA relating to promotional competitions and highlight the most important obligations placed on a promoter when running a promotional competition.
PROMOTIONAL COMPETITIONS IN TERMS OF THE CPA:
Section 36 of the CPA governs promotional competitions and defines a promoter as “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.”
A promotional competition is further defined in the CPA as “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 in terms of subsection (11) (currently R1.00),
irrespective of whether a participant is required to demonstrate any skill or ability before being awarded a prize.”
Given the rather wide definitions in the CPA and the low value threshold, it is safe to say that the vast majority of competitions conducted in South Africa will be governed by the CPA.
HOW A PROMOTOR CAN COMPLY WITH THE CPA:
Very importantly, a promoter of a promotional competition must not require any consideration to be paid by the participant (e.g. the participant should not be asked to pay for the opportunity to participate in the competition or participation in the competition should not require the purchase of goods and services at a price that is more than what is ordinarily charged without the opportunity of taking part in the competition) other than the reasonable costs for posting or transmitting an entry form.
For the purposes of ensuring fairness, the CPA also requires that a promoter may not award a prize to any person who is a director, member, partner, employee or agent of, or consultant to, the promoter or to the supplier of any goods or services in respect of that competition.
Before each competition, the promotor must prepare a set of competition rules which should be made available to any participant upon request. Regulation 11(6) of the CPA also requires that a copy of the competition rules (together with certain important information) be retained for a period of at least three years.
A promotor must ensure that an offer to participate in a promotional competition must clearly state the following:
- the competition or benefit to which the offer relates;
- the steps required to participate in the competition or accept the offer;
- the basis on which the results of the competition will be determined;
- the closing date for the competition;
- the medium through which the results of the competition will be made known; and
- the person from whom, the place where and the date / time on which a successful participant may receive the prize.
The promoter must further 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.
The CPA imposes a significant burden on promotors who wish to run a promotional competition, both from an administrative and financial perspective. It is therefore important for a promoter to be aware of and adhere to these requirements as far as possible to prevent non-compliance and possible punitive measures being taken against the promoter.
Let us know if you require any assistance in drafting promotional competition rules or overseeing and certifying the running of the competition.