1 October 2009

Promotional competitions - two notable changes

The Act will repeal section 54 of the Lotteries Act and its Regulations dealing with promotional competitions. The Act reiterates most of the provisions of the soon-to-be repealed legislation relating to promotional competitions, but with two notable changes.

The first notable change relates to the definition of 'promotional competition'.

The Act defines a promotional competition as "any game, competition, scheme, arrangement, system, plan or device for distributing prizes by lot or chance, conducted in the ordinary course of business for the purposes of promoting goods, services or persons, where the prize exceeds a certain threshold, and irrespective of whether or not participants are required to demonstrate any skill or ability before being awarded a prize".

Under the Lotteries Act, it is possible to argue that a competition which involves an element of skill by a participant is not a promotional competition, as the element of skill suggests that the distribution of prizes is not by chance. The revised definition in the Act closes that loophole by making the element of skill irrelevant, thus having the effect that more competitions will fall within the definition of a 'promotional competition' (and thus be subject to regulation).

The second notable change is that there is no exemption for competitions that do not involve a 'subscription' as defined. The Lotteries Act defines a 'subscription' as the payment of any consideration in respect of the right to participate in a competition.

Currently under the Lotteries Act, if promotional competitions do not involve the payment of such consideration, they are exempt from the provisions of the Lotteries Act and its Regulations for promotional competitions. By contrast, the Act does not mention any exemption for promotional competitions that do not involve a subscription. The only exemption is for competitions where the prizes on offer have a low value, one that is below a threshold to be prescribed by the Minister of Trade and Industry.

Under the Act, offers to participate in promotional competitions must state minimum prescribed information, such as precise details of the offer to enter the competition and prizes, the steps required to accept the offer, how results will be determined, the closing date for the competition, and the manner in which the results will be made known. Also, consumers cannot be required to pay any consideration in respect of the competition other than the reasonable costs of entering the competition. It is therefore important that the rules of a promotional competition are carefully drafted to ensure compliance with the provisions of the Act. Competition rules must be in place before the competition is advertised and must be made available to any prospective entrant or the Consumer Commission on request.

Ilhaam Jakoet,
Associate, Corporate and Commercial

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