Complicated promotional competitions under the Consumer Protection Act

Promotional competitions are a terrific way to create a better awareness about a product, service or brand and generate some buzz. These competitions are on Facebook Pages, dedicated microsites and on company websites. They can be a lot of fun and the prizes are often terrific. Unfortunately for marketers, these competitions are about to become a lot more complex from a legal perspective when the Consumer Protection Act comes into force on 1 April 2011.

Contestants in Miss Psywar contest

Marketers or promoters have historically used a pretty short list of rules to govern competitions in the past but this is going to change. Section 36 of the Consumer Protection Act deals with Promotional competitions and will impose a series of requirements for not only what should be included in competition rules but also what information and documentation should be retained after the competition comes to a close. This section is informed by the draft Consumer Protection Act regulations and regulation 14 in particular which sets out important detail. The regulations are not yet final and are subject to change but they give strong indications of what lies ahead for promoters.

For starters, the competition rules (actually, terms and conditions may be a better description) must be prepared and made available to prospective contestants at the beginning of the competition and must be made available at no cost to contestants. Promoters are also required to retain the competition terms and conditions at the end of the competition. I understand the time period to be 5 years but I stand to be corrected. Other information the promoter must retain for “at least five years” will likely include the following (this is not a complete list of information the promoter must retain):

  • the promoter’s full details;
  • a copy of the offer to participate in the competition (this must set out the competition benefits, steps to accept the offer and participate in the competition and more details commonly found in competition rules used today);
  • names and identity numbers of persons responsible for conducting the competition;
  • a representative selection of materials marketing the competition (this could include screenshots or other screen captures if the competition is marketed online);
  • a full list of prizes;
  • declarations by people responsible for conducting the competition that winners were not excluded from being winners in terms of the Consumer Protection Act; and so on.

Promoters may also be required to report on various aspects of the competition to effectively establish compliance with the Consumer Protection Act and furnish the Consumer Commission with this information on demand.

To add to all of this, the regulations currently envisage competitions being conducted under the supervision of a chartered accountant, registered auditor, admitted attorney or commissioner of oaths and must be reported on through the promoter’s internal audit reporting procedures. This requirement, alone, adds quite an overhead to competitions and its not clear what must be audited: individual winners or the process used to determine the winners.

Conducting competitions under the Consumer Protection Act is not a simple matter. I have just barely scratched the surface with this post. The rules themselves begin to resemble detailed terms and conditions, particularly when you factor in the myriad disclosures marketers and their clients will have to include to comply with other aspects of the Act. The traditional half page rules just won’t do anymore.

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