PROMOTIONAL OFFERINGS AND THE CPA
The Consumer Protection Act, No 68 of 2008 (herein after referred to as the “CPA”) has compelled owners to rethink the way they conduct their business.
The ease with which the public can be accessed through the use of social media makes the use of promotional competitions an attractive avenue from where companies can market their business and promote their products and services.
Section 36 of the CPA defines promotional competition as any competition, game, scheme, arrangement, system, plan or device for distributing prizes (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) by a promoter (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) to participants (means a person who enters, competes in or is otherwise eligible to win a promotional competition, irrespective of whether a participant is required to demonstrate any skill or ability before being awarded a prize) by lot or chance if it is conducted in the ordinary course of business for the purpose of promoting a business, goods or services and exceeds the value of R1.00.
With this wide definition of a competition, businesses are compelled to consider the CPA when conducting promotional offerings and when drafting the necessary rules a promoter must:
- prepare the competition rules before the beginning of the competition;
- the rules may not require a participant to attend a prize giving ceremony without giving him the opportunity to decline such an offer;
- 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;
- retain the information for the competition for at least three years;
and must 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;
- award a prize in a competition to:
- a winner if it is unlawful to supply the goods or services; or
- to any person who is a director, member, partner, employee or agent of, or consultant to the promoter or any other person who directly or indirectly controls or is controlled by, the promoter; or
- to a supplier of goods or services in connection with a the competition.
- require any further consideration payable after the prize has been awarded.
From the body of section 36 of the CPA it is clear that the purpose of these directives is to discourage scams and to encourage properly conducted promotional offerings. When preparing your promotional competition use this article in association with section 36 of the CPA to ensure that your offering complies with the necessary requirements.
Article written by Gerhard Truter during December 2013
Barnard Incorporated is a firm of attorneys situated in Centurion, Pretoria.