Internal Affairs investigating text messaging competitions

4.00pm

Internal Affairs is investigating two text messaging competitions which it believes may be illegal following changes to gambling laws earlier this year.

Manager of gaming and operational policy Kate Reid said the department had not yet decided whether the competitions fell foul of the Gambling Act, but was close to deciding whether to mount a prosecution concerning one of the competitions.

Text messaging competitions have been a nice earner for telcos and broadcasters and an important source of income for some hi-tech start-ups in the nascent wireless applications market.

Ms Reid said the department had provided advice to several organisations in response to written queries, advising them proposed competitions could be illegal in their suggested form.

The warning came as Telecom began accepting text messaging competitions on its mobile network following a temporary hiatus while the telco ensured it was operating in compliance with the Gambling Act, which came into effect in July.

A Telecom spokesperson said the company had been talking to Internal Affairs and was confident it was not running competitions in breach of the Act.

"We are continuing to provide services for customers which run text message competitions. In our view we had never really suspended services, it was more that we didn't have a competition proposal in front of us while we were checking our compliance."

The Gambling Act banned almost all forms of gambling using cellphones in a bid to protect children and teenagers from potentially having 24-hour access to instant gambling. The rules are also designed to stop promoters and telcos profiteering from competitions and loading costs on to consumers.

Organisers of any text-based competition must be able to prove they are running a genuine sales promotion, which must not cost the consumer any more than the standard communication fee to enter -- typically 20 cents for an SMS (text) message.

Vodafone drafted guidelines to help promoters using its mobile network ensure they are operating within the law and to protect itself.

A spokesperson would not disclose what was in the guidelines.

"Our role with respect to providing such services to third parties is to be the communications carrier. However, the Act does contain some very broad offences.

"If Vodafone is not scrupulous about the services it carries we may incur liability."

When running competitions on its own behalf, the Vodafone marketing and legal teams work closely to ensure compliance.

Internal Affairs' Ms Reid said the attitude of most organisations had been to ensure they were playing by the rules rather than to quibble over the legislation.

In August, the department advised businesses considering whether to run competitions to get "professional, independent legal and financial advice".

But, Ms Reid said, some groups had sought to exploit certain "grey areas" within the legislation.

She was not prepared to comment further to avoid encouraging the practice.

"Really, our point in doing this is to stop people making money from these competitions when they should be putting it up themselves."

For example, many competitions offered a receipt message so consumers knew their entry had reached its destination.

The cost of this service, while it might entice more participation, may not be passed on to the consumer and must be borne by the promoter or telco, she said.

"We realise that telcos and promoters may still be getting a cut and that is all part of the market, so long as they are not profiting above the normal cost of communication."

The department does not pro-actively monitor competitions. However, it will act on any complaints or where any potentially illegal competition comes to its attention.

Ms Reid said prosecution was an expensive option and would not be taken lightly.

"Usually a warning is sufficient, but if circumstances warrant it, such as repeat offences or where large sums of money are involved, it is an avenue open to us."

Penalties for an individual operating an illegal competition can be up to one year's imprisonment and up to $2000 in fines.

The maximum fine for a body corporate is $50,000.

"That might not seem a lot for a large company, but there is also a loss of face in being involved in a court action," she said.

- NZPA