LOTTERIES ACT – IMPACT ON PROMOTIONAL COMPETITIONS IN NAMIBIA
1. WHY IS IT IMPORTANT?
1.1. On 01 December 2021 the Lotteries Act (Act 13 of 2017) (“the Act” ) and its Regulations came into operation.
1.2. Despite the limited scope of its name, the Act aims to have far-reaching implications on the day-to-day operations of many normal Namibian businesses.
1.3. Taking note of the Act is important as it prohibits various promotions and competitions that are currently conducted in Namibia.
2. THE ACT’S DEFINITION OF “ UNLAWFUL COMPETITION”
2.1 Section 73 of the Act provides as follows:
“(1) Unless authorised by or under this Act or any other law, a person may not conduct through any newspaper, broadcasting service or any other electronic device, or in connection with any trade or business or the sale of any article to the public –
(a) any competition or lottery other than one authorised by or under this Act in which prizes are offered for forecasts of the result of either – (i) a future event; or (ii) a past event, the result of which has not yet been ascertained or is not yet generally known;
(b) any competition other than a promotional competition contemplated in section 72 in which success does not depend on a substantial degree of skill; or
(c) any promotional competition which is the subject of a declaration contemplated in section 72(5).
(2) A person who contravenes or fails to comply with subsection (1) commits an offence and is liable to a fine not exceeding N$100 000 or to imprisonment for a period not exceeding two years, or to both such fine and such imprisonment.
2.2 The impact of the Act is that it prohibits any competition in Namibia which is not a promotional competition or does not require substantial skill, if such competition is advertised through any newspaper, broadcasting services or any other electronic device or in connection with any trade or business or the sale of any article to the public.
2.3 The Act results in regulatory overreach and is an attempt at gross market disruption. Anything from raffle ticket sales, radio competitions, online competitions, fundraising activities, in-store promotions, awareness programmes, social media promotions with a competition or promotional incentive is prohibited in terms of the Act or is now subject to compliance with the Act.
2.4 The constitutionality of Section 73 of the Act is doubtful when reasonably tested against the Namibian Constitution which affords the right to fair administrative justice and the right to practice any trade without unreasonable restrictions in law.
3. PRACTICAL IMPLICATIONS
3.1 This Act and its Regulations can be criticised for flagrantly ignoring a myriad of practical and commercial considerations related to business operations.
3.2 Section 73 of the Act declares to be unlawful all promotions or competitions that are not promotional competitions in terms of the Act. The definition of promotional competition is therefore important. The Act defines “promotional competition ” as:
“any competition, game, scheme, arrangement, system, plan or device for distributing prizes by lot or chance, if –
(a) it is conducted in the ordinary course of business for the purpose of promoting a producer, distributor, supplier, or association of any such persons, or the sale of any goods or services; and
(b) any prize offered exceeds the threshold prescribed in terms of section 72(4)(b)(iv), irrespective of whether a participant is required to demonstrate any skill or ability before being awarded a prize.”
3.3 Section 72 provides amongst others that a promotional competition is lawful if:
3.3.1 it is conducted in Namibia;
3.3.2 the Consideration payable for the purchase of goods / services is the price ordinarily paid for similar goods and services;
3.3.3 the Consideration payable for the purchase of goods / services is not increased by the opportunity to participate in the promotional competition;
3.3.4 the Consideration is the only consideration payable for the goods / services and includes consideration for the right to compete;
3.3.5 the opportunity of participating in the promotional competition is not the only or the only substantial inducement to a person to purchase or use the goods or services to which the promotional competition relates; and
3.3.6 it complies with the applicable regulations.
3.4 It is unclear if cross-border competitions qualify as promotional competitions.
3.5 Section 72 further provides that the Minister of Environment, Forestry and Tourism may in consultation with the Lotteries Board, established by the Act, make regulations relating to promotional competitions in general. Such regulations were published with regulations 50 to 58 being applicable to a promotional competition
3.6 Regulation 57 was locally drafted (i.e. not copied from the now repealed South African Regulations) and creates substantial practical problems.
3.6.1 Regulation 57(1) requires a promoter of a promotional competition to ensure that an independent accountant, registered auditor (i.e. an auditor) or a legal practitioner, as approved by the Board, oversees and certifies the conducting of the competition (presumably a promotional competition is meant) and must report this through the internal reporting or other appropriate validation or verification procedures of the promoter. This requirement is vague and may be unnecessarily strenuous on the promoter depending on what the Minister would consider a certified promotional competition and the required validating and/or verification procedures.
3.6.2 Regulation 57(2) creates a contradiction in the limit on the value and number of prizes that any party may distribute with promotional competitions within each calendar year. It provides that:
“For the purposes of –
(a) section 72(4)(b)(i) of the Act, the maximum value of prizes which may be offered in each calendar year is the amount of N$12 000 000; and
(b) section 72(4)(b)(ii) of the Act, the maximum number of prizes which may be offered in each calendar year may not exceed six, each of which may not exceed a total value of N$1 000 000 .”
3.6.2.1 A basic mathematical calculation would render the aforementioned provision entirely unreconcilable, as it is impossible to have a maximum prize value of N$12,000,000.00 per year while the maximum prizes to be distributed may only be six with a limit of N$1,000,000.00 or less per prize (resulting in a maximum of N$ 6,000,000.00).
3.6.2.2 Our understanding is that many Namibian enterprises currently have various promotions that offer more than six prizes.
3.7 Were it not for the provision in Section 73 of the Act that makes it a crime to conduct any promotion or competition that is not a promotional competition , the absurd Regulation 57 would probably not have bothered most Namibian businesses. However, as Section 73 creates a statutory offence, all businesses in Namibia are now expected to alter their promotions and competitions to fall within the definition of promotional competition in the Act.
4. LEGAL ADVICE
All impacted businesses should seek legal advice from their legal advisors before conducting activities that could be deemed to contravene the Act.
5. DISCLAIMER
Kindly note that this note is not intended to be legal advice. The recipient hereof may not place any reliance hereon. The note is distributed for information purposes only and Cronjé Inc, nor its directors, employees or associates can not be held liable for any direct or indirect loss that may be suffered as a result of reliance on the content of this note. In the event that the content hereof is relevant to any reader, we advise that the reader is to approach their legal practitioner for legal advice.
6. CONTACT DETAILS
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