Businesses using till slips, mobile apps and “buy-and-win” promotions to offer consumers entry into prize draws could soon face tougher regulatory oversight following a new agreement between South Africa’s consumer and lottery authorities.

The National Consumer Commission (NCC) and the National Lotteries Commission (NLC) have signed a memorandum of understanding aimed at strengthening cooperation on investigations, enforcement action and complaint handling involving lotteries, sports pools and promotional competitions.

The agreement is expected to affect a wide range of marketing campaigns, including app-based giveaways, fast-food promotions, SMS and USSD competitions, as well as retail “buy-and-win” offers linked to purchases.

According to the regulators, the partnership will focus on compliance monitoring and enforcement efforts targeting competitions or lottery-related activities that may breach either the Consumer Protection Act or the Lotteries Act.

Promotional competitions under scrutiny

The NLC has previously stated that promotional competitions are considered a form of lottery, although these activities fall under the Consumer Protection Act instead of lottery legislation.

The commission has also cautioned that unauthorised lotteries may include virtually any game of chance operating outside the provisions of the Lotteries Act.

Research by Olivia Lindhorst in an LLM thesis submitted to the University of Pretoria highlighted concerns that some promotional competitions could become unlawful where consumers effectively pay indirect or inflated entry fees through linked product purchases.

Lindhorst further noted that responsibility for regulating promotional competitions shifted to the Consumer Protection Act in 2011 because these campaigns are commonly used in mainstream retail and marketing rather than traditional gambling settings.

Disclosure requirements

Legal firm Michalsons Attorneys has published guidance stating that promoters must clearly disclose competition rules, prize information, closing dates and how winners are selected. Businesses are also expected to maintain records related to competitions.

According to the firm, a promoter includes any business that offers prizes valued above R1 as part of its normal operations.

The NLC has previously indicated that it investigated competitions presented as promotional campaigns but which failed to comply with the Consumer Protection Act.

Cooperation framework

The new arrangement between the NCC and NLC will also include joint workshops, seminars, training initiatives, referrals and information-sharing between the two bodies.

The regulators said they plan to introduce a framework for categorising complaints so that cases are directed to the appropriate authority more efficiently.

NLC commissioner Jodi Scholtz described the agreement as overdue, adding that the commission is required under the Lotteries Act to operate with integrity while protecting participants in the National Lottery and sports pools.

NCC acting commissioner Hardin Ratshisusu said the two regulators would work together on matters involving lotteries, gambling and sports pools to tackle non-compliance and strengthen consumer protection.

The NCC said the agreement establishes a formal structure for cooperation on issues linked to the regulation of lotteries, gambling and sports pools.