Illegal lotteries under investigation

By Damaria Senne, ITWeb senior journalist

Johannesburg, 13 Feb 2006

Companies that require entrants to use their mobile phones to enter competitions and charge more than the cost of a normal SMS are operating illegal lotteries, says Sershan Naidoo, spokesperson for the National Lotteries Board (NLB).

The only requirement to enter a competition that is intended to promote a product should be the purchase of that product, says Naidoo. When the fee charged to send an entry by SMS is more than the normal cost of sending it, the competition is no longer an ordinary promotional activity but an unlicensed lottery, which makes it an illegal activity, he says.

The NLB has launched an investigation into these illegal lotteries, which came about as a result of the NLB`s media monitoring activities, Naidoo says.

Companies that run competitions to promote a product should ensure their activities comply with the National Lotteries Act, he advises. Information about how competitions and lotteries are governed is available on the NLB Web site.

"People should also know that the cost of entering a competition by SMS should be the same as the cost of sending a normal SMS, and should not be the R2 or R5 they usually pay," he says.

The Wireless Applications Service Providers Association (WASPA) has not received official communication from the NLB regarding the issue, says WASPA`s chairman, Leon Perlman. Competitions charging entrants more than the cost of a normal SMS have been running for a number of years without action from the NLB, he notes.

Regulations related to the National Lotteries Act were considered by many WASPs to be unclear regarding new technology, Perlman says. "When the regulations were drafted some time back, new technology like premium-rated SMS was not taken into consideration," he says.

The challenge is not unique to SA. Europe is also facing the same challenge where the law does not provide for premium-rated SMSes, he says. WASPA would welcome dialogue with the NLB, he adds.