Texting competition has sequel in court

Two men who allegedly ran a failed text messaging competition promising 27 Peugeot Cabriolet cars as prizes are defending charges of organising an illegal lottery.

The two appeared for the start of a week-long defended hearing in the Auckland District Court yesterday but their names have been suppressed.

The TXTDrive competition ran during March 2004.

Entrants would watch TV2 and obtain a word of the day. The entrant then text messaged the code to 3030, at a cost of 99c.

The text was forwarded to a company called Lateral Profiles Ltd, which had technology to note the sender's details and send back a message advising them of their entry and telling them to go to any Pizza Hut to claim a free garlic bread or Pepsi.

Judge Nicola Mather heard that after Telecom and Vodafone took about 50c a message and Lateral Profiles took 5c, the competition organisers estimated they would make $2.5 million.

Their partner was to receive $600,000 and they were to receive over $1.5 million, said the prosecutor for the Department of Internal Affairs, Mark Woolford.

However the competition failed because of a lack of entrants.

The men received only $414,595 and after costs for Telecom, Vodafone and Lateral Profiles were deducted, none of the 27 winners received cars.

"It is understood that there has been a settlement with the prize winners which involved the payment of some money to them," Mr Woolford said.

He said the competition was illegal because it was not authorised by Internal Affairs and did not comply with the Gaming and Lotteries Act 1977 which had changes made to it, formally introduced in July 2004.

He noted that to be considered a sales promotion, and therefore exempt from having to obtain a licence, the competition needed to be promoted by a manufacturer, distributor, wholesaler or retailer for the purpose of promoting the sale of goods or services.

The competition must not involve selling goods at more than the usual retail price and no other costs were to be involved, he said.

Department of Internal Affairs senior gambling inspector (licensing) Rob Hunter, said no application had been made for a lottery licence by the men or their partner company.

Mr Hunter told defence counsel Ron Mansfield that Internal Affairs would not normally hear from anyone running a sales promotion as they were exempt from the act.

He said that when the act changed in July 2004, after the TXTDrive competition ran, people wanting to run sales promotions were told they could not charge contestants more than 20c a text message if they wanted it classified as a sales promotion.

Among the 11 people to give evidence this week will be some of the successful contestants who never received their cars.