Vanessa Van Coppenhagen | Partner | Spoor & Fisher | mail me |
A brand runs an on-pack promotion: buy a product, find the code inside, enter it on an app, and you might win a prize. The prize could range from a free lunch to an all-expenses-paid trip to Paris.
Thousands of people enter, and a winner is drawn. The marketing team would love to announce the winner with a photograph and a celebratory post on social media. However, the winner would rather not.
The winner would also rather not provide the documents the promoter requires before she can redeem her prize. She does not want to do anything other than say, “Thank you” and eat her free lunch in peace, preferably in Paris. After all, she wonders, wasn’t buying the qualifying product and entering the competition enough?
The legal framework for promotional competitions
South African promotional competition law is delicate. It is a layered framework comprising the Consumer Protection Act, 2008 (CPA), the Lotteries Act, 1997, and the Protection of Personal Information Act, 2013 (POPIA). The Advertising Regulatory Board’s Code of Advertising Practice (ARB Code) complements this framework.
Brands and their agencies navigate this legal landscape on a regular basis. They are often familiar with its challenges. These include a competition mechanic that crosses the line into an unlawful lottery. This verification step sits awkwardly with a winner’s vested rights, or a publicity clause that fails to withstand legal scrutiny.
What does this legal framework say about requiring the purchase of a qualifying product to enter a promotional competition? What does it say about verifying the identity of winners? Finally, what does it say about winners who would prefer not to be photographed?
Promotional competitions are expressly included within the definition of “lottery” under the Lotteries Act, 1997. However, the CPA now regulates promotional competitions. It repealed an older section of the Lotteries Act. The relationship between the two statutes is not entirely straightforward.
The ongoing debate
There is an ongoing academic debate about whether a CPA-compliant promotion falls outside the scope of the Lotteries Act altogether. Alternatively, it may remain a lottery that compliance with the CPA simply renders lawful. The absence of consequential amendments to the Lotteries Act has left this question unresolved. In practice, promoters must ensure that their competition mechanics and competition terms comply with section 36 of the CPA.
At the heart of the distinction between a lottery and a promotional competition is the prohibition on consideration. A promoter must not require any payment to participate, gain access to the competition, or obtain any device needed to enter.
A promoter is treated as having required payment if participants must pay for the chance to win. The same applies if participation requires them to purchase goods or services at a price higher than their ordinary selling price. Put simply, consumers may pay for the product, but promoters may not make them pay for the competition.
Designing compliant competition mechanics
In practice, promotional competitions increasingly feature scan-to-win codes, app-based entries and WhatsApp submissions. Promoters should test these mechanics for compliance during the design phase rather than after campaign launch.
Under the CPA, the right to a prize vests in the winner as soon as the competition results have been determined. Once that right has vested, the promoter cannot make it conditional on any additional requirements. It cannot depend on the winner making any payment or satisfying any requirement beyond those originally stipulated in the competition rules.
Promoters have legitimate reasons to verify winners. These include confirming their eligibility, preventing fraud, excluding the categories of people the CPA disqualifies, and meeting their record-keeping obligations. Verification that constitutes a necessary administrative step and that the competition terms regulate is permissible. However, a new condition that qualifies or defeats the vested right is not. The verification process should not inadvertently trespass into “new condition” territory.
Promoters should also tread carefully when limiting access to prizes. A promoter may not restrict the time or manner in which a prize may be redeemed during a particular period unless it has given participants at least 20 business days’ written notice of that restriction. In addition, the total period during which prize availability is restricted may not exceed 90 days in any calendar year. In short, a winner’s right to collect cannot be quietly narrowed after the fact.
Winners, publicity and personal information
Any competition rule requiring a winner to permit the use of their image, participate in marketing activities, or attend the draw or winners’ announcement without an opportunity to decline is invalid. The winner may refuse to do so and still collect the prize. The brand has no inherent right to a winner’s name, image or likeness for marketing purposes. Consent must be obtained as a voluntary release. The winner must remain free to decline.
Publicly sharing an image represents one form of personal information use. However, promotions often collect other details along the way. Competition entries typically request personal information such as names, mobile numbers, identity numbers, banking details and location data too. Once promoters collect this information, POPIA applies.
Promoters must collect only necessary information and provide reasons why they collect it. They must also secure the information, retain it only as long as needed, and comply with cross-border transfer requirements where applicable.
When the prize really is a free lunch
Having navigated this terrain, promoters must keep thorough and well-organised records. The CPA Regulations require an independent professional, such as an accountant, auditor, attorney or advocate, to oversee and certify how the competition is run. Promoters must also keep records of the rules, the prizes, the winner selection, declarations of eligibility and proof of prize delivery.
So, is there such a thing as a free lunch when you win it? Yes. Winners can accept the prize, decline the photograph and eat in peace. For the promoter, however, the lunch is free only if the mechanics, consent, data, cross-border transfers and record-keeping have been addressed before LUaNCH.
