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An Evaluation of the Self-Regulation of Promotional Competitions in South Africa

DP Strachan

Author DP Strachan Affiliation University of Pretoria, South Africa Email danie.strachan@gmail.com Date published 3 June 2016 Editor Prof C Rautenbach How to cite this article   Strachan DP "An Evaluation of the Self-Regulation of Promotinal Competitions in South Africa" PER / PELJ 2016(19) - DOI http://dx.doi.org/10.17159/1727-3781/2016/v19i0a730 Copyright CC This work is licensed under a Creative Commons Attribution 4.0 International License. DOI http://dx.doi.org/10.17159/1727-3781/2016/v19i0a730

Abstract Promotional competitions are competitions in which prizes are awarded by lot or chance in order to promote goods or services. In order to protect participants and consumers against abuse, these competitions are usually regulated by gambling or consumer protection legislation. However, the relevant legislation is often complemented by self-regulation, which is the focus of this contribution. Self-regulation entails the regulation or governing of an industry by the role players in that industry. This article commences by explaining the relevant terminology and exploring self-regulation in general, including the various forms of self-regulation and the binding force thereof. The nature of self-regulation is discussed together with the advantages and challenges associated with this form of regulation. This is followed by some examples of self-regulation on a global level in order to provide a comparative perspective on the topic. The provisions of the International Chamber of Commerce's Consolidated Code of Advertising and Marketing Communications Practice are summarised and the European Advertising Standards Alliance's role in self-regulation is considered. Attention is also given to the relevant industry codes in the United Kingdom in view of the comprehensive way in which promotional competitions are covered by self-regulation in that country. The main part of the article centres on the self-regulatory position in South Africa. A brief overview of the role and function of the Advertising Standards Authority of South Africa (ASASA) is provided. The provisions of the ASASA's Code of Advertising Practice are then examined and some ASASA rulings are discussed in order to illustrate the relevant principles. Thereafter, the focus shifts to the Code of Conduct of the Wireless Application Service Providers' Association, which contains detailed provisions relating to promotional competitions. Some relevant rulings are also considered. In conclusion, comments are made regarding the current state of the self-regulation of promotional competitions in South Africa. Keywords Promotional competitions; prize competitions; consumer protection; self-regulation; advertising; sales promotion; ICC Consolidated Code of Advertising and Marketing Communications Practice; European Advertising Standards Alliance; Code of Non-Broadcast Advertising, Sales Promotion and Direct Marketing; Code of Advertising Practice of the Advertising Standards Authority of South Africa; Code of Conduct of the Wireless Application Service Providers' Association. ……………………………………………………….

1              Introduction

Marketers employ various tools in order to grow businesses and increase sales. These include advertising, direct marketing and sales promotion activities.[1] There are various forms of sales promotion activities, but only one of them will feature in this article: the prize promotion. This form of sales promotion involves an activity in which consumers can win a prize. In some prize promotions, winners are selected based on their skill, while in others the outcome is determined by lot or chance (luck).[2] In South Africa, chance-based prize promotions are known as "promotional competitions",[3] and these competitions will be the focus of this article.

Promotional competitions are often regulated by legislation in order to protect consumers against abuse.[4] The statutory regulation is frequently complemented by self-regulation in the form of industry codes.[5] The purpose of this article is to consider the self-regulation of promotional competitions in South Africa. This evaluation commences with a discussion of self-regulation in general in order to explore the unique nature of this form of regulation, including the advantages and disadvantages attached to it. This is followed by an examination of the self-regulation of promotional competitions on an international level. South African businesses can consider the provisions of international codes in order to identify best practice in relation to the conducting of promotional competitions. The international codes can also influence the drafting of industry codes in South Africa. The focus then shifts to a detailed analysis of the self-regulatory position in South Africa.

2             Self-regulation in general

Self-regulation entails the regulation or governing of an industry by the role players in that industry.[6] It is a type of "decentred regulation",[7] based on the notion that governments should not have the sole role in regulation.[8] It should not be regarded as "an imperfect substitute for government regulation", but could be viewed as a form of regulation in its own right.[9] Self-regulation can relate to a variety of subject matters, such as health, product safety, the environment, marketing, advertising and privacy.^[10]

Self-regulation can take on many forms, but broadly one can distinguish between voluntary self-regulation and self-regulation that is backed up by legislation.[11] It could be regarded as "co-regulation", which was developed by an industry in order to avoid government regulation, but could also be created as a result of government's pressure on or directive to an industry.[12] While some authors explain that self-regulation is often developed as a result of "soft law" – which can consist of guidelines, directives and communications issued by a government[13] - others regard self-regulation itself as a form of soft law.[14]

The binding force of self-regulation can vary. For example, the provisions of an industry code might be binding only on the members of a voluntary industry organisation that adopted the code.[15] However, legislation could make an industry code binding on all members of the relevant industry as well.[16] An example of this would be an industry code that has been accredited in terms of the provisions of the CPA.[17]

Self-regulation, and industry codes in particular, can have the benefit of amplifying consumer protection legislation and providing specific guidance in a particular industry.[18] It is easier to update such a code on a continuous basis, and the involvement of industry experts usually leads to better industry standards.[19] It is also more practical to put in place and enforce industry self-regulation, which is not burdened by the formalities associated with government legislation.[20] Furthermore, self-regulation provides an opportunity for corporations and their critics to collaborate.[21] It can develop consumers' trust in an industry and make an industry more credible.[22] In an advertising context, Boddewyn explains that self-regulation can be very effective because advertising takes place in the public eye and is therefore subject to public scrutiny and practical sanctions (such as rulings that require the withdrawal of an advertisement or the publication of corrections).[23]

However, self-regulation is not without criticism. It can be flawed due to the involvement of and "cosy arrangements" between industry role-players.[24] Without a strong industry body and clear sanctions it can be toothless.[25] Woker remarks that organisations often ignore sanctions or resign from industry organisations if they are taken to task.^[26] Self-regulation is also weakened by inconsistent enforcement.[27] In addition, its effect can be questioned if the industry is not transparent and accountable.[28] Critics remark that "the industry's perceived abuses alienate consumers and conflict with the goal of consumer protection".^[29] Ultimately, the value of self-regulation depends on industry members' compliance with the spirit and letter of the relevant industry codes.[30]

In South Africa, section 82 of the CPA provides for the development of industry codes of conduct and the accreditation of industry ombuds. These industry codes are therefore examples of "sanctioned self-regulation".[31] Some codes have already been accredited, while others are in progress.[32] Once a code has been accredited it becomes binding on all suppliers in the relevant industry, who must adhere to the provisions of the code.[33] Failure to comply with the provisions of a code can amount to "prohibited conduct" – which can lead to sanctions.[34]

3             Examples of international advertising self-regulation

3.1         The International Chamber of Commerce

There is an ongoing effort to implement advertising self-regulation on an international level.[35] The International Advertising Association, and the International Chamber of Commerce (ICC) in particular, have been playing key roles in this endeavour.[36] The ICC's Commission on Marketing and Advertising bears the responsibility for drafting and revising codes for the marketing and advertising industries.[37] The ICC's first Code of Advertising was released in 1937.^[38] Self-regulatory organisations in numerous countries have modelled their advertising industry codes on the ICC's Code of Advertising,[39] and the Code has been described as the "bible of advertising self-regulation".[40] The latest revised version of the ICC Consolidated Code of Advertising and Marketing Communications Practice ("ICC Code") was published in 2011.[41]

The ICC Code is merely a self-regulatory code.[42] It is not binding on any particular person or organisation, and is subordinate to whatever legislation may apply.[43] The ICC does not publish any rulings relating to the ICC Code, although it might provide guidance on the interpretation of its provisions.[44] However, the ICC motivates "its adoption and use" on a global basis in order to set "standards of ethical conduct" relating to the "promotion of any kind of goods and services".[45] A number of organisations apply the ICC Code, for example the Danish Consumer Ombudsman,[46] the Swedish Advertising Ombudsman[47] and the German Advertising Standards Authority.[48] A number of countries' self-regulatory organisations have also based their advertising industry codes on the ICC Code, including South Africa, Mexico, India and Canada.[49]

Apart from the "General Provisions on Advertising and Marketing Communication Practice" established by it,[50] the ICC Code contains a chapter which is dedicated to sales promotions.[51] The chapter regulates various kinds of sales promotions, such as premium offers, price reductions and vouchers.^[52] It defines a prize promotion as "any skill contest or prize draw used in conjunction with a sales promotion activity".[53] Accordingly, the provisions would apply in respect of skill-based contests as well as competitions in which the outcome is determined by chance.

The ICC Code sets out a number of general principles in respect of sales promotions.[54] These provisions are aimed at ensuring fair and honourable conduct, meeting consumer expectations, prompt and efficient administration, transparent terms and conditions, fair conduct and avoiding anything which is "likely to bring sales promotions into disrepute".[55] These general principles are followed by some specific provisions. If one applies the specific principles to prize promotions, the ICC Code can be understood to require that all offers relating to prize promotions must be clear and free of exaggeration.[56] A prize promotion must not be marketed in a way which might mislead consumers regarding the "value, nature or the means of participation".[57] If consumers are required to purchase a product in order to participate in the prize promotion, the promoter must ensure that the availability of those products is sufficient to meet anticipated demand.[58] The relevant promotional items need to be safe and free of hazards.[59] There are specific provisions that pertain to sales promotion intermediaries as well.[60]

The ICC Code also deals with the information that must be made known to consumers in relation to prize promotions, and prescribes the minimum details that must be disclosed.[61] This information must include the competition rules, details about any costs of participation (excluding communication costs at or less than standard rates), restrictions on the number of entries, details regarding prizes, the winner selection procedure, the competition's closing date, when and how results will be announced, the winners' tax obligations, when prizes must be collected, and information about how the winners' images or their entries might be used after the competition.[62]

3.2         The European Advertising Standards Alliance

The European Advertising Standards Alliance (EASA) promotes self-regulation in the advertising industry on a regional level.[63] The EASA consists of the self-regulatory organisations that operate in the Alliance's various member countries in addition to members from the advertising industry.[64] The advertising industry in Europe established the EASA in order to self-regulate advertising and avoid legislation being passed instead.[65] The EASA does not have its own industry code, and its self-regulatory organisation members typically base their own codes on the ICC Code.[66] The EASA is also a member of the International Chamber of Commerce and is involved in setting the standards contained in the ICC Code.[67]

The EASA does not function as an umbrella self-regulatory organisation for Europe,[68] but functions as "the advertising industry's single voice on self-regulation".[69] It does, however, coordinate complaints received in respect of advertising across European countries' borders.[70] A consumer in one country can therefore file a complaint against an advertisement with the self-regulatory organisation in the consumer's country, and that organisation will then refer the complaint via the EASA to the self-regulatory organisation in the country where the media platform that carried the advertisement is based.[71] The EASA also carries out advertising monitoring projects and provides advertising clearance advice.[72]

One of the EASA's aims is to ensure that advertising self-regulation is extended across the European Union.[73] The EASA publishes an overview of self-regulation in Europe and other countries.[74] In addition, it issues recommendations and guidelines in respect of self-regulatory codes. Some argue that this creates "a form of delegated regime within the EU", due to the European Commission's involvement in the EASA's issuing of guidelines.[75] The EASA has also formulated best practice recommendations relating to the operations of self-regulatory organisations that are members of the EASA.[76] The best practice recommendations relate to matters such as universality, funding, efficient administration, effective codes, the provision of advice and information, efficient complaint handling, adjudication, sanctions, compliance and monitoring as well as awareness.^[77] To an extent, the best practice model assists in achieving more consistency amongst the various self-regulatory organisations in Europe.[78]

3.3         United Kingdom

3.3.1     Code of Non-Broadcast Advertising, Sales Promotion and Direct Marketing

There is comprehensive self-regulation of prize promotions in the United Kingdom and the relevant industry codes can therefore serve as useful examples for comparative purposes.[79] The United Kingdom Code of Non-Broadcast Advertising, Sales Promotion and Direct Marketing (the CAP Code) is compiled by the Committee of Advertising Practice (CAP) and enforced by the United Kingdom's Advertising Standards Authority.[80] The CAP Code contains a section dedicated to sales promotions.[81] There are also non-binding guidelines in respect of prize promotions.^[82]

The CAP Code enjoins promoters to display equitable, prompt, efficient, fair and honourable conduct, and to avoid causing consumer disappointment, when conducting sales promotions.^[83] In addition, its provisions are aimed at protecting consumers and their safety, and require that promotions must be suitable and not cause offence.^[84]

In defining a sales promotion, the CAP Code states that it "can provide an incentive for the consumer to buy by using a range of added direct or indirect benefits, usually on a temporary basis, to make the product more attractive".[85] It mentions "text-to-wins, instant-wins, competitions and prize draws" as examples of sales promotions.[86]

While promoters often state that promotional goods are "subject to availability", the CAP Code requires that promoters must ensure that they anticipate reasonable demand.[87] In general, promoters are required to ensure that they organise and administer their competitions properly in order to avoid consumer complaints.[88] Prizes must also be awarded within the advertised time period - "normally within thirty days".[89]

The CAP Code contains detailed provisions relating to the disclosure of information, and promoters are required to communicate all key terms and conditions to consumers, particularly in circumstances where consumers might be misled if they are not aware of those terms and conditions.[90] The terms and conditions must not be too complicated, and promoters should only in exceptional circumstances amend or supplement them.[91] If space and time does not permit disclosure of the full terms and conditions, promoters must direct consumers to another source where the terms and conditions can be found.[92] In the context of prize promotions, promoters must explain to consumers how they can participate,^[93] describe any available alternative entry route,^[94] and indicate the competition's start date^[95] and closing date.^[96] Promoters must mention any proof of purchase requirements,^[97] entry restrictions (such as age restrictions or consent requirements),^[98] and limits on the number of entries that will be accepted.^[99] The terms and conditions must disclose the date by which prizes will be handed over if this will happen more than thirty days after the competition has closed.^[100] They must also disclose how and when winning entrants will be notified that they have won, and winners' names must be published or made available on request.^[101] The terms and conditions must contain details of how winners will be used for publicity purposes after the competition (if applicable).^[102] The promoters name and correspondence address must be communicated as well.^[103]

Prizes are central to competitions and the CAP Code contains detailed provisions in this regard. It requires promoters to disclose the number and nature of prizes.[104] They may not create the impression that prizes can be won if that is not the case.[105] They must also not "exaggerate consumers' chances of winning",[106] or create the false impression that the consumer has won a prize or stands a chance to do so if the consumer must incur a cost to do so or if there is no prize to be won.[107] The promotion's rules must state whether the promoter will be entitled to substitute prizes with cash alternatives.[108] A promoter should withhold prizes only if entrants have not complied with the entry requirements,[109] but can do so if consumers were informed in advance that prizes might not be awarded if there were insufficient entries.[110] If the winners are determined by way of a prize draw, the process must be absolutely random and an independent person must oversee the draw (unless the results are determined by a computer).[111] In instant-win competitions the prizes must be available immediately or winners must be able to receive their prizes without delay.[112]

3.3.2     The PhonepayPlus Code of Practice (PCP)

If a promoter will use premium rated telephone services as part of a competition, it must observe the relevant provisions of the PCP.[113] The latter regulates the provision of premium rate telephone services in general.[114] It requires that service providers must make sure that consumers are provided with sufficient information, particularly relating to the costs of premium rate services.[115] Consumers must be treated fairly.[116] Harm must be avoided.[117]

PhonepayPlus has also issued a guidance note in respect of prize promotions.[118] It requires that promoters must compile comprehensive competition terms and conditions.[119] Consumers must not be misled,[120] and additional information should be made available to consumers upon request.[121] Prize promotions should be conducted in a fair and equitable manner.[122] Promoters must also consider the implications of the Gambling Act 2005 and know when a competition will be classified as a lottery.[123]

4             Self-regulation of advertising in South Africa

Advertising regulation in South Africa consists of a combination of self-regulation, common law and legislation.[124] The self-regulation component consists mainly of the Code of Advertising Practice (ASA Code), which is enforced by the Advertising Standards Authority of South Africa (ASASA), and the Code of Conduct of the Wireless Application Service Providers' Association (the WASPA Code). Promotional competitions often fall within the field of advertising in South Africa.[125] One needs to examine the relevant self-regulatory industry codes in order to identity and consider the provisions that deal with promotional competitions in particular.

4.1         Advertising Standards Authority of South Africa

The ASASA was established by role-players in the advertising and marketing industries in order to self-regulate advertising in South Africa and to promote integrity in advertising.[126] The ASA Code is the cornerstone of the ASASA's regulatory functions.[127] It is founded on the principle that advertising "should be legal, decent, honest and truthful".[128] The ASASA is a voluntary association. The ASA Code therefore does not have the effect of generally binding legislation. (This may change if the ASA Code is prescribed and accredited as an industry code in terms of section 82 of the CPA.)[129] However, all members of the ASASA are bound by the ASA Code.[130] In addition, the Electronic Communications Act[131] requires that all broadcasting licensees must adhere to the ASA Code's provisions.[132] The ASA Code applies to "the advertiser, the advertising practitioner and the medium involved in the publication of the advertiser's message to the public", to the extent that they are bound by the ASA Code.[133]

The ASA Code's provisions cover a broad range of matters related to advertising. It also contains some limited provisions relating to competitions in particular. If an advertiser advertises a competition, the ASASA may require the advertiser to provide substantiation that the competition is legal.[134] The ASA Code also contains some provisions in respect of fundraising competitions.[135] Furthermore, it requires that if an advertisement displays the value of a prize, the value must be inclusive of "VAT".[136] Presumably, "VAT" refers to "value-added tax" levied under the Value-Added Tax Act.[137] It is submitted that the ASA Code contains this requirement in order for consumers to be informed of the full value of the prize. However, it is not quite clear why the ASASA considered it necessary to regulate this. It is submitted that the consumer would not have been severely prejudiced if the advertised value had been exclusive of value-added tax. Of course, if the consumer were required to purchase goods to a certain value in order to enter the competition, it would have been important to display the value with value-added tax included. In any event, the Value-Added Tax Act provides that prices shall be deemed to include value-added tax,[138] and a vendor is required to include the tax in the advertised prices.[139]

In the context of timeshare advertising, the ASA Code states that an advertiser may not refer to gifts or awards as "prizes" except if a competition is being run.[140] Furthermore, the ASASA's Food and Beverage Code provides that a competition may not be targeted at minor children unless the advertising for the competition states that parents or legal guardians must accept the competition offer on behalf of their children.[141] In relation to alcohol advertising, Appendix A to the ASA Code states that competitions aimed at children "may not be linked to any alcohol beverage brand or product through sponsorship", and advertising should make it clear that persons younger than eighteen years may not participate in competitions that promote alcohol brands or products.[142]

Competition organisers often expect winners to participate in promotional activities and require the use of their images and photographs in promotional and advertising material. In this regard the ASA Code states that advertisers may not depict living persons in advertisements without the prior consent of such persons.[143] Accordingly, organisers would have to obtain prior permission from competition winners and participants before using their photographs in any advertising material. However, there are exceptions to this rule. The organiser would not need to obtain consent if the persons are depicted in background shots, provided that the usage is not "defamatory, offensive or humiliating" and the advertisement must be withdrawn if it receives an objection from a person depicted in the advertisement.[144] Consent would also not be required if, in the ASASA's opinion, the depiction "is not inconsistent with the subject's right to a reasonable degree of privacy and does not constitute an unjustifiable commercial exploitation of the individual's fame or reputation".[145]

The ASASA does not carry out advertising monitoring and will not of its own accord initiate steps against infringers of the ASA Code.[146] If the promoter of a competition does not comply with the ASA Code's provisions, a consumer or competitor can file a complaint with the ASASA.[147] It must be kept in mind that the ASA Code regulates advertising only. Therefore, in the context of promotional competitions, a complaint would typically relate to the content of a competition's advertising and marketing materials.^[148] Complaints would not necessarily relate to the actual mechanics of a competition, although the adviser can be required to provide proof that the competition is lawful.^[149]

If a complaint is filed, the alleged infringer will have an opportunity to respond before the complaint will be considered by the ASASA's Directorate, Advertising Standards Committee or Advertising Industry Tribunal.[150] If the complaint is upheld, the infringer may be ordered to withdraw the relevant advertising,[151] to submit an amended version for pre-clearance,[152] or to submit all further advertising for pre-clearance for a limited period.[153] A ruling can involve adverse publicity for the offender too, such as the publication of its name.[154] The ASASA can also require the offender to publish the ruling against it.[155] However, the ASASA is not empowered to impose fines or require advertisers to comply with their own advertising.[156]

The ASA Code is binding on members of the ASASA only. However, these members include a wide variety of industry organisations and trade associations.[157] Accordingly, although an individual advertiser might not be an ASASA member, the ASA Code will still apply if the relevant advertising is carried by an entity such as a broadcaster or newspaper that belongs to an association which is an ASASA member. If the ASASA rules against an advertiser and it fails to comply with the ruling, the ASASA can issue a so-called ad alert.[158] If this is done, no ASASA member will carry or publish the offending advertiser's advertising.[159] If the ASA Code is eventually accredited by the National Consumer Commission in terms of the CPA's provisions, a breach of the ASA Code will also constitute prohibited conduct and a fine could be imposed by the National Consumer Tribunal.[160]

4.2         Examples of ASASA rulings relating to promotional competitions

On a regular basis the ASASA publishes rulings relating to complaints considered by the ASASA's dispute resolution bodies.[161] From time to time those complaints relate to advertising involving competitions. Often the complaints have to do with misleading, dishonest or ambiguous claims in such advertising. For example, in a complaint against a competition conducted by a newspaper, the ASASA Directorate decided that the relevant advertising material was misleading and contravened Section II 4.2.1 of the ASA Code, because the material created the impression that a participant would win a motor vehicle if the participant held a specific number, while the participant would in fact receive only the opportunity to win.[162] In another matter involving misleading advertising, the advertiser undertook to change its advertising material because the material stated that participants would receive one competition entry for every fax received using the advertiser's service, while the terms and conditions stated that at least twenty faxes would have to be received in order for someone to stand a chance to win a prize.[163]

Advertisers should also take care to avoid misleading claims in relation to the prizes offered in competitions. For example, in Denny Mushrooms SMS Competition / E A Van Zyl[164] the advertiser's product packaging displayed this statement: "WIN R250 000 WORTH OF GROCERY VOUCHERS". The ASASA Directorate ruled that the statement was ambiguous and misleading, because it could be interpreted in various ways (for example, one winner could win vouchers to the full value or several winners could win vouchers up to the total value).[165] In Denny Mushrooms, the Directorate referred to the ruling in Sta-Soft / T Marshall[166] in which the advertising material stated: "Win one of 10 makeovers worth R100 000!" In that matter, the Directorate had found that the statement was misleading because it was not clear whether all ten makeovers would be worth R100 000 in aggregate (in other words, R10 000 per makeover), or whether each makeover was worth R100 000.[167] Generally, advertisers must be able to substantiate advertised prize values.[168] Prize descriptions must also not be misleading.[169]

The ASASA Directorate has also ruled that advertising would be misleading if it involves a competition and the advertising material (and product packaging in particular) does not display the competition's closing date.[170] It is submitted that the closing date of a promotional competition should be made known in order to avoid situations where a consumer purchases a product in order to enter a competition which is being conducted in relation to that product, only to discover that the competition has already ended.

Based on previous ASASA rulings, it appears that it would be prudent for an advertiser to ensure that product packaging contains sufficient and clear information regarding a competition and how it works.[171] For example, if the competition involves text message entries, advertisers must ensure that the full costs of the text messages are properly disclosed.[172] However, although a competition's closing date might be a material term that should be displayed on product packaging[173] the ASA Code does not require the full terms and conditions of the competition to be displayed in advertising material relating to the competition.[174] It is submitted, however, that it would be prudent for the advertiser to make th full terms and conditions available, since the terms and conditions might protect the advertiser in disputes with participants or winners.[175] In general, in view of previous ASASA rulings, a promoter should ensure that the contents of a competition advertisement are accurate.[176]

4.3         Wireless Application Service Providers' Association

The detailed self-regulation of promotional competitions is also found in the industry code adopted by the Wireless Application Service Providers' Association (WASPA). The WASPA is a voluntary association which was established to self-regulate mobile-based value-added service providers in South Africa.[177] Value-added service providers are persons or entities "that provide services and data through wireless and mobile devices over public networks".[178] The WASPA "aims to ensure that consumers receive world-class services and that members operate according to ethical and reasonable business practices".[179] In order to achieve this, the WASPA enforces the WASPA Code,[180] which is binding on all WASPA members.[181] The WASPA's media monitors conduct daily research in order to verify whether or not WASPA members are complying with the WASPA Code.[182] The WASPA is also a member of the International Audiotex Regulators Network (IARN).[183] The IARN is an international organisation that was formed for the purposes of sharing information regarding the regulation of phone-paid services.[184]

The WASPA Code contains a section which regulates promotional competitions specifically.[185] It defines a "promotional competition" as "any competition, game, scheme, arrangement, system, plan or device for distributing prizes as defined in section 36 of the Consumer Protection Act, 2008".[186] In view of the cross-reference to the CPA, it appears that section 18 of the WASPA Code is focussed on chance-based competitions.

Under the WASPA Code, the maximum permitted cost of a competition entry is R1.50.[187] This is the same as the limit specified in the Consumer Protection Act Regulations.[188] The WASPA Code states that "[a]ll valid and correct entries must have the same chance of winning".[189] It is submitted that promoters may therefore not discriminate between competition entries and that promoters should give all entrants the same opportunity to win. Furthermore, a competition must have a closing date (unless it is an instant win competition), and prizes must be allocated within 28 days of that date.[190] For a period of 30 days after the closing date, the promoter must send a reply to further entrants, advising them that the competition has closed.[191] (It is assumed that the references to "days" imply calendar days. The WASPA Code refers to "days" in section 18, while it refers to "business days" in some other sections.) A promoter may also not extend a competition period or fail to award prizes on the basis that insufficient entries were received or that the entries were of inadequate quality.[192]

An offer which invites the public to enter a promotional competition must at least contain the information prescribed by the WASPA Code. Section 18.4 requires that the offer must state the following:

(a)       the competition to which the offer relates;

(b)       the steps required by a person to participate in the competition;

(c)        the full cost to enter the competition;

(d)       the basis on which the results of the competition will be determined;

(e)       the closing date for the competition;

(f)        how the results of the competition will be made known;

(g)       how a person can obtain a copy of the competition rules; and

(h)       how the successful participant can obtain the prize.

These requirements are very similar to those contained in section 36(5) of the CPA. In previous versions, the WASPA Code required that the advertising material had to include, inter alia, "any information which is likely to affect a decision to participate".[193] It is submitted that it would have been difficult to comply with such a requirement, since various factors might influence a participant when a potential participant considers whether or not to enter a competition. This could include, for example, the odds of winning or the number of expected participants.

The information listed in section 18.4 of the WASPA Code must be contained in an advertisement relating to the competition, or must be provided to entrants before they enter.[194] The WASPA Code also prohibits certain practices in relation to promotional competitions.[195] In addition, promotional competitions that are aimed at children may not involve cash prizes or lengthy or complicated rules.[196]

The WASPA adjudicates complaints relating to breaches of the WASPA Code on a regular basis.[197] Many complaints pertain to competitions. In some instances, the matters related to situations where competitions' terms and conditions or entry costs were not properly displayed in the relevant marketing material,[198] or where recipients of text messages relating to a competition were not able to opt out from receiving further messages.[199] In other cases the complaints involved matters where competitions were linked to subscription services.[200] Illegal competitions have been the subject of complaints as well.[201] There are also examples of other breaches of the WASPA Code in the context of competitions.[202]

As opposed to the ASASA, the WASPA actively monitors the advertising and services of WASPA members in order to determine if they comply with the provisions of the WASPA Code.[203] Anyone, including a member of the public, a competitor or the WASPA media monitor, may file a complaint with the WASPA in relation to a WASPA member's breach of the WASPA Code.[204] Complaints are adjudicated by independent adjudicators appointed by the WASPA.[205]

If a WASPA member is found to have contravened the WASPA Code, it could be ordered to remedy the breach or pay a fine.[206] Its WASPA membership could be suspended or terminated as well.[207] Since WASPA member usually provide wireless application services to other businesses (for example, in order to send direct marketing messages), members can be required to disclose the identity of their customers, to cease providing services to them or to withhold any moneys due to them.[208] The network operator over whose network the member's services are provided could also be advised to take steps such as terminating or suspending the member's access to a specific number or category of services, withholding funds due to the member, paying such funds to the WASPA as a fine, or issuing a refund to customers.[209] The WASPA Code extends beyond WASPA members as well, since notices can be issued to non-members too.[210] If a WASPA member allows a non-member to breach the WASPA Code's provisions, such a member will be deemed to be in breach of the same provisions.[211] It appears, therefore, that the WASPA Code makes provision for extensive sanctions that could be very effective in practice. Further, in contrast with the ASA Code, the WASPA Code's provisions and sanctions extend beyond mere advertising and address the actual services provided by WASPA members too.

4.4         General

Apart from the provisions of the ASA Code and the WASPA Code, promoters need to ensure that they comply with the requirements of any other applicable industry codes. For example, in the context of direct marketing, members of the Direct Marketing Association of Southern Africa must comply with its Code of Ethics and Standards of Practice.[212] In the pharmaceutical industry, organisations who are members of the Marketing Code Authority must heed the requirements of the Authority's Code of Marketing Practice.[213]

5             Conclusion

There appears to be a high level of self-regulation in the marketing and advertising industry in South Africa. This should provide some protection to consumers and offer recourse in situations where promoters follow abusive advertising and marketing practices in general. However, it seems that the provisions relating to promotional competitions are quite limited, particularly when compared to the comprehensive provisions contained in the United Kingdom's CAP Code. In essence, the ASA Code expects promoters merely to ensure that their competitions comply with applicable law and that prize values are displayed as VAT inclusive amounts.[214] Although the provisions relating to promotional competitions are limited, it does appear that the ASASA rules on complaints that relate to promotional competitions from time to time. In the relevant matters, the ASA mostly applied the provisions that relate to truthful advertising. Even so, the rulings can serve as useful guidance for promoters.

Self-regulation has the potential to be effective, flexible and continuously developing.[215] When it comes to promotional competitions, this potential was left untapped in the drafting of the ASA Code. Accordingly, it is submitted that the ASASA should consider crafting provisions that can complement and amplify those contained in the CPA.

A different situation is encountered when one considers the WASPA Code. It contains more substantial provisions relating to promotional competitions and regulates matters that are not found in the CPA. For example, it requires that competitions must have closing dates and states that closing dates may not be changed.[216] The WASPA Code also requires that prizes must be awarded after the closing date and promoters must do so within a specific period.[217] Some of the WASPA Code's provisions are also simpler and clearer than those contained in the CPA. For example, the CPA prescribes the information that must be disclosed by a promoter as part of an offer to participate in a promotional competition,[218] but the provisions relating to the manner in which such information must be disclosed are not entirely clear.[219] The WASPA Code contains similar provisions, but they have been drafted in a simpler and clearer manner.[220] The WASPA Code regulates the marketing of promotional competitions as well. In essence, the provisions prohibit promoters from giving consumers false impressions regarding their chances of winning.[221] These provisions complement and amplify the similar ones found in the CPA.[222]

In conclusion, it is submitted that the efficacy of industry regulation depends on industry members' cooperation with self-regulatory bodies. The relevant industry codes contain quite extensive sanctions. Complaints should be resolved efficiently and the sanctions should be used against transgressors in order to deter promoters from breaching the relevant industry codes.

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Constitution of the Republic of South Africa, 1996

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Communications Act 2003

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List of Abbreviations

AJLP	Australian Journal of Legal Philosophy
ASA Code	Code of Advertising Practice of the Advertising Standards Authority of South Africa
ASASA	Advertising Standards Authority of South Africa
CAP	Committee of Advertising Practice (United Kingdom)
CAP Code	United Kingdom Code of Non-Broadcast Advertising, Sales Promotion and Direct Marketing
CLP	Current Legal Problems
CPA	Consumer Protection Act 68 of 2008
EASA	European Advertising Standards Alliance
EJCL	Electronic Journal of Comparative Law
IARN	International Audiotex Regulators Network
ICC	International Chamber of Commerce
ICC Code	International Chamber of Commerce: Consolidated Code of Advertising and Marketing Communications Practice
JAR	Journal of Advertising Regulation
JCP	Journal of Consumer Policy
JLS	Journal of Law and Society
JPM	Journal of Promotion Management
L&P	Law and Policy
MCA	Marketing Code Authority
MLR	Modern Law Review
OJLS	Oxford Journal of Legal Studies
PCP	PhonepayPlus Code of Practice
U Pa J Int'l Bus L	University Pennsylvania Journal of International Business Law
VAT	Value-Added Tax
WASPA	Wireless Application Service Providers' Association
WASPA Code	Code of Conduct of the Wireless Application Service Providers' Association

 

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