Lotteries Amendment Bill, 2001

1. INTRODUCTION

Section 54 of the Lotteries Act, 1997 (Act No. 57 of 1997) ("the Act") makes provision for the regulation of promotional competitions. Section 54 also places an obligation on the Minister of Trade and Industry to make regulations in respect of promotional competitions. Section 54 has not yet come into operation.

The main purpose of section 54 is to protect the National Lottery and other legal lotteries against competition as well as the general public participating in promotional competitions.

Promotional competitions had prior to the enactment of the Act been prohibited by the now repealed Gambling Act, 1965 (Act No. 5 of 1965). Despite this prohibition, promotional competitions have for many years been conducted openly and in general without prosecutions taking place in this regard. The version of the Bill leading to the enactment of the Act first tabled in Parliament, based on that report, did not contain any provisions in respect of promotional competitions. The provisions of section 54 were added to the Bill during the consideration thereof by the relevant Parliamentary committee.

2. DISCUSSION

2.1 Draft Regulations: Reaction

Regulations to be made in terms of section 54 were published in the Government Gazette for public comment. Approximately 140 submissions were received from interested parties. The submissions received generally reacted disfavourably to the draft regulations. Apart from complaints in respect of specific provisions in the regulations, it was clear from the comments that the provisions of section 54 were viewed by most as unpractical, unimplementable, hostile to and not cognisant of accepted marketing practise and realities, and unduly restrictive on bona fide business operations. The maximum value of prizes, limited by section 54 to R 1 million annually, was especially severely criticized.

2.2 Findings and statistics: UNISA Bureau for Market Research

2.2.1 Marketing industry in SA generates R 16 billion (1999)

2.2.2 Average advertising and promotion budget

top 100 ad-spenders = R 57 million annually

smaller ad-spenders = R 18 million annually

2.2.3 Promotional competitions run by 66,7 %

2.2.4 Average value of cash prizes:

top 100 ad-spenders = R 2,5 million

smaller ad-spenders = R 585 000

2.2.5 Average value of prizes in the form of goods or services:

top 100 ad-spenders = R 1,2 million

smaller ad-spenders = R 970 000

2.2.6 Average value of first prize:

top 100 ad-spenders = R 250 000

smaller ad-spenders = R 98 000

2.2.7 Average number of promotional competitions:

top 100 ad-spenders = 18

smaller ad-spenders = 14

2.2.8 Joint promotional competitions: 78,1 %

The UNISA report concluded that " Ö current business practises regarding promotional competitions differ substantially from the stipulations contained in the Draft Regulations Ö".

2.3 Comparison: Section 54 vs Current practise

 

Subject

Sec 54 / draft regulations

Current practise

2.3.1

Value of prizes

R 1 million /per calendar year

Annual average:

R 1,83 in cash +

R 1, 133 in goods

2.3.2

Highest 1st prize

R 100 000

Average = R 205 000

(Almost 10% = R 1 million or more)

2.3.3

No of promotional competitions

Periods between competitions, 6 possible annually

Average =

16, 9 annually

2.3.4

Duration

Maximum 3 months

Average of longest competition =

16, 9 months

2.4 Promotional Competitions

2.4.1 Participation:

48 % = free entry (not affected by Lotteries Act = see section 63)

38 % = purchase of goods

15 % = subscriber, license

10 % = phone in

7,6 % = mail, fax etc

2.4.2 Maximum value of R 1 million prizes per calendar year:

86 % = Too restrictive

8 % = Not to restrictive

6 % = Donít know

2.4.3 Maximum value of R 100 000 first prize:

96 % = Too restrictive

4 % = Not to restrictive

2.4.4 Mechanisms for ensuring protection of public:

Publication of results: 84 %

Auditors: 68 %

Public drawing of prizes: 60 %

2.4.5 Employment implications: 89,9% are of the opinion that employment will be influenced negatively by draft regulations

2.4.6 Negative impact of promotional competitions on National Lottery:

Yes: 4 %

No: 96 %

2.5 Board conclusion

The Lotteries Board considered this report and concluded that, since one of the main purposes of section 54 had been to protect the National Lottery and other lotteries, and in view of the lack of impact of promotional competitions on those lotteries, the strict provisions of section 54 could be amended to retain the measures affording protection to the general public.

3. PROPOSED AMENDMENTS

Section 54 provides for competitions which in essence are lotteries. Lotteries are defined as including "any game, scheme, arrangement, system, plan, promotional competition or device for distributing prizes by lot or chance". This however applies only to competitions where some form of consideration in involved. Where entry is free and not dependent on the purchase of goods or services, section 63 provides that the Act does not apply.

Our courts have held that even where the opportunity to take part in a promotional competition does not add anything to the amount normally paid for the goods which must be purchased, that promotional competition constitutes a lottery.

Section 56(a) of the Act provides that any lottery not authorised by the Act is unlawful. Any promotional competition not complying with the Act will therefore be unlawful.

The Board is of the opinion that the proposed amended section 54 retains the provisions necessary to achieve the intended object of that section, namely the protection of the general public. It seems that promotional competitions do not impact negatively on the National Lottery.