SA Marketers hit the jackpot with Amendment to Lotteries Bill

The introduction of the lottery caused much commotion – in a frenzy of excitement, lottery tickets were purchased and secret numbers safely guarded as the country held its breath for the Saturday night draw that would turn someone into an instant millionaire. It was the hottest conversation topic for months, as South Africa succumbed to Lotto Mania...

Hardly any other event has engendered quite as much excitement or as much passion as the long awaited lotto exploding onto the South African scene, just 18 short months ago. Since it’s inception, it is estimated that some 22 million people – half of the country’s population - have spent over R4,5 billion rand on tickets. The country has over twenty thousand lottery outlets strewn across supermarkets, kiosks, post offices, video rental stores, gas stations, and even in butcher shops. And with some three million people tuning in to catch the bi-weekly draws broadcast directly to their living rooms, there is no doubt that the national lottery has reached an enviable market saturation, with maximum brand awareness of their slogan, Tata ma Chance, Tata ma Millions

But the launch of the National Lottery almost claimed a high price from the country’s marketers, when the simultaneous introduction of The Lotteries Act effectively proposed the banning of all other forms of marketing promotion, sweepstakes and promotional competitions that had some form of prize attached.

Not only would this law jeopardise the life-blood of charities and non profit organisations by restricting all forms of promotional fund raising activities, the proposed Act would so severely have limited the size and nature of promotional competitions that they soon could have disappeared altogether from the marketing mix.

But this week it was the South African marketing fraternity’s turn to hit the jackpot, as the offending section of the law was rescinded by the National Assembly. The Lotteries Amendment Bill now provides for the total revision of Section 54 – the section of the act restricting promotional competitions. The remodelling of the Act is being heralded as a victory for marketers, and follows extensive lobbying by the Direct Marketing Association. (DMA)

According to Davy Ivins, executive director of the DMA, the original intention of the Lotteries Act was two-fold; to prevent competitors, (such as the then-existing Kwa-Zulu Natal weekly draw) from muscling in and setting up a rival lotto scheme, and to prevent other organised promotions or sweepstakes from eating up funds that could be pouring into the national lottery’s coffers.

Section 54 of the 1997 Lotteries Act defines a promotional competition as … “a lottery conducted for the purpose of promoting a sale or use of any goods, and includes any game, scheme, arrangement, system, plan or competition”. And although promotional competitions had previously been prohibited in the now-repealed gambling act of 1965, many organisations had being running promotional competitions for many years, without prosecution.

“At that time we argued that international experience proved that promotional competitions were in no way a threat to the success of the lottery,” says Ivins, but to no avail. The Act was passed, sparking an outcry amongst the country’s marketers. And when the regulations to enforce the Lottery Act were first published, it became apparent that many marketers would be severely affected by the new restrictions.

Chief industry concerns focussed on the effect the Act would have on the marketing industry in general, but on direct marketers specifically. “Many companies use a prize or a promotion as an incentive to respond to offers,” said Ivins. “The Act would have placed severe restrictions on marketers, who viewed the Act as unpractical, unimplementable and unduly restrictive of bona-fida business operations,” he said, adding that the maximum monetary value on prizes, which under Section 54 was limited to R1 million, was especially severely criticized.

Barry Lloyd, Chief Executive Officer of Heritage Holdings, (which includes the Heritage Collection and Readers Digest in its stable), agreed that the imposed monetary ceiling was of grave concern to the company. “The ever spiralling devaluation of the Rand has had a huge impact on the perceived value of cash prizes. Face it: A million rand today is just not worth what it was even two short years ago,” he said. Lloyd added that the administrative complexities proposed by the Act were just too onerous for most companies to comply with, which would have impacted on the use of promotional competitions as a marketing vehicle.

The DMA launched a strong information campaign and representation to government, which resulted in the temporary withdrawal of the regulations. In all, the Lotteries Board received some 140 written submissions to overturn the act, the majority of which came from members of the Association. Having succeeded in halting the proposed regulations, the DMA embarked on the second phase of its lobbying campaign of ‘quiet diplomacy’ with the Department of Trade and Industry and the Lotteries Board to demonstrate that the legislation was unnecessary.

Underpinning this campaign was a drive to actively encourage marketers not to take advantage of the legislative vacuum, but to act in accordance with the principles of the Act. The DMA cautioned industry that if it abused the hiatus, government would enforce the law, and put an end to the future of promotional competitions altogether.

And when the DTI published the Lotteries Amendment Bill in October, effectively rescinding Section 54 of the Act, DMA director Christianne Duval was invited to address the Trade and Industry Parliamentary Portfolio Committee. Following compelling argument by Duval, the Committee approved further changes to the Bill which now addresses all marketers’ concerns.

Marketers have welcomed the news. “We are thrilled that government has acknowledged that promotional competitions and sweepstakes do not threaten the lottery,” says Heritage’s Barry Lloyd. “Promotional competitions are an effective direct marketing response mechanism, and an essential part of the marketing mix.”

The outcome, says Ivins, is a victory for self-regulation, and industry restraint and demonstrates government’s willingness to address and resolve industry issues. “By their actions, marketers have proven unequivocally that promotional competitions are not a threat, and that the law is unnecessary,” he said.

The Amended Bill has been referred to the National Council of Provinces, before going before the President for final approval. For further updates, get online to www.dma.org.za, or call the Direct Marketing Association on (011) 482-6440.