11 Oct 2011

(IL)Legality of Pepsi's one crore jackpot prize and why this competition is not available in Tamil Nadu

Pepsi Competition

Pepsi Co., one of the largest cold drinks manufacturers in India has introduced a prize competition in association with the popular Sony TV programme Kaun Banega Crorepati (KBC). The prize involves answering of a simple question given behind the label of Pepsi Cos cold drink bottles and sending the right answer via SMS to the given number. One winner (to be picked by a random draw of lots) would be given a one crore rupees prize on the sets of KBC at the end of the period of the contest.

Pepsi has mentioned in its terms and conditions that the offer of the prize is not available in the state of Tamil Nadu. One may have noticed that schemes to win prizes such as these are offered by almost all consumer companies for promoting their products and increasing sales. Such schemes are becoming increasingly common with mobile operators sending SMSes to consumers urging them to participate in easy contests to stand a chance to win prizes and companies dealing in consumer goods holding lucky draw contests to distribute prizes to customers.

However, the legality of such competitions or schemes may be challenged under the Consumer Protection Act and the Lottery (Regulation) Act.

1. Does the Pepsi contest amount to a lottery?

Three essential elements have to be satisfied for an activity to be considered a lottery: prize, chance and mutual consideration. While prize and chance are certainly present in this contest (this contest being a predominant game of chance, since the extremely simple question is a mere qualification and cannot be said to involve a substantial degree of skill); it is quiet unclear whether there is an element of mutual consideration involved in the contest, i.e. whether the organisers (Pepsi Co.) is getting a share of the revenue from the SMS costs and using this collected amount to disburse prizes.

The terms and conditions laid down by Pepsi Co mention that the answer to the question has to be messaged to an ordinary mobile number and not a five digit special number. Thus it seems that only ordinary message charges will apply for sending the answers and the revenue from the SMSes will only go to the telephone operators and not Pepsi or KBC.

Thus, if the third element of mutual consideration is not fulfilled, then the contest cannot be said to be a lottery and hence the penal provisions of running an illegal lottery will not be applicable in this instance.

However, it must be noted that all companies holding contests where consumers are required to send answers to simple questions to special 5-digit numbers and the revenue from the SMS charges is shared by the contest-holding companies may be held to be illegal lotteries under the Lotteries (Regulation) Act 1998, Section 294-A of the Indian Penal Code and other state laws.

2. The Pepsi contest amounts to an unfair trade practice under the Consumer Protection Act

It is also apparent that this particular contest conducted by Pepsi amounts to an unfair trade practice under Section 2(1)(r) 3 of the Consumer Protection Act, 1986 and Pepsi and all other contests held by companies would be liable to compensation to the consumers if a complaint is made to any district consumer forum.

Section 2(1) (r) 3 of the Consumer Protection Act reads as follows:

“unfair trade practice” means a trade practice which, for the purpose of promoting the sale, use or supply of any goods or for the provision of any service, adopts any unfair method or unfair or deceptive practice including any of the following practices, namely:

(3) permits-

(a) the offering of gifts, prizes or other items with the intention of not providing them as offered or creating impression that something is being given or offered free of charge when it is fully or partly covered by the amount charged in the transaction as a whole;

(b) the conduct of any contest, lottery, games of chance or skill, for the purpose of promoting, directly or indirectly, the sale, use or supply of any product or any business interest…

It is thus abundantly clear that all such contests or gift schemes organised by companies, which are obviously conducted with the intent of promoting products or services, would be within the ambit of unfair trade practices and could be shut down by the Consumer courts under Section 14(2) (f) of the Consumer Protection Act.

In fact a similar Har Seat Hot Seat contest organised by KBC in association with Airtel was held to be an unfair trade practice by the Consumer Grievance Redressal Forum in Society Of Catalysts vs Star Plus Tv, Star India Pvt. Ltd (2008) and KBC/Airtel were asked to pay a compensation of Rs. 1 crore for their unfair practice.

3. Why such prize schemes are not available in Tamil Nadu?

The state of Tamil Nadu has passed a law The Tamil Nadu Prize Schemes (Prohibition) Act way back in 1979 which prohibits companies to give any prizes on the sale of products. Contravening these provisions is made a criminal offense where offenders may be punished with up to three years of imprisonment.

No other state in India has made a specific law banning prize schemes on products, similar to the Prize Schemes Act of Tamil Nadu. Companies have assumed that there would be no other laws prohibiting such schemes, forgetting the provisions in the Consumer Protection Act and the applicability of lottery laws to these competitions.

With inputs and suggestions from Ramanuj Mukherjee

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