New Zealand DIA Warns Companies Offering Text-Based Contests

New Zealand's Department of Internal Affairs issued a warning Thursday to companies offering text-based contests. The department says the contests, in which consumers often incur higher per-call costs than normal, are illegal lotteries.

The DIA's official statement was aimed at telecommunications companies and media outlets that routinely offer text-based contest in conjunction with promotional broadcasts or marketing giveaways.

The department's director of gaming and censorship regulation, Keith Manch, said that contests designed to make money from the text messaging fees are in violation of the 2003 Gambling Act, which came into full effect last month.

Manch said text-based campaigns could be held in conjunction with a sales promotion, but businesses are breaking the law if no goods or services are offered. When prizes are offered for people who send a text message to a particular number (allowing them to get into draw), he said, the contest becomes an illegal lottery.

"Gambling is licensed in New Zealand as a form of community fundraising only and not as a commercial venture for a business," Manch said. "The only exceptions Parliament has allowed to this rule are the six casinos."

The warning has taken some of New Zealand's media outlets by surprise.

"It's the first we've been made aware of any issues," Roger Beaumont , a spokesman for CanWest MediaWorks, told the New Zealand Herald. Beaumont said the company's legal team is looking further into the matter.

Vodafone, which regularly runs text competitions, has sought a clarification of the Gambling Act from the DIA. Sarah Williams, a spokesman for Vodafone, said the company won't proceed with any text competition in New Zealand unless compliance is assured.

"There are still gray areas," Williams said.

Manch said the primary reason for the warning was underage gambling.

"The immediate danger of [text-based] gambling is that young people, and others, are less likely to know how much money they are losing when it appears that no money is changing hands," he said. "The losses are charged to a telephone account or at times a credit card. Long term, and potentially more seriously, the younger people are when they start gambling the more likely they are to develop gambling problems."

John Stansfield, the CEO of the Problem Gaming Foundation, told the Herald that underage gambling is a growing concern.

"Youth are now growing up in a generation where gambling has become acceptable," Stansfield said. "With the advancement of new technology, gambling is becoming increasingly appealing to young people. This is a very dangerous space indeed."

Manch urged companies offering text-based contests to consult their legal departments or other independent agencies to determine whether their efforts are in violation of the law.

He also said there will be prosecutions if the number of illegal text-based promotions holds steady or continues to rise.