Are penny auctions gambling

Posted 2/15/11 : South African authorities confirm illegality…until Gambling Amendment Act passes
 
The excruciatingly slow journey of South Africa towards legalised and regulated online gambling continued this week with a confirmation from the government’s Department of Trade and Industry that the law in its current draft form would effectively bring internet auctions under proposed gambling regulations.
 
According to the online publication MyADSL, South African legal experts have already opined that
online penny-auction sites could run afoul of consumer protection regulations and South Africa's draft gambling laws. The country has a number of such operations.
 
“Penny auction sites make their money not on the price a ‘winner' pays for an item advertised; they make the vast majority of their cash from the fact that every bid placed costs the individual placing it a far larger sum of money than just the single penny added to the final price of the item,” the DTI explained, adding that a regulation ruling that non-refundable fees may not be charged to participate in an auction means that penny-auctions actually operate in contravention of the proposed regulations.
 
“Having considered the way these auctions are conducted it is now clear that this is similar to gambling and can be regulated under gambling regulations,” the DTI told MyBroadband.
 
In a contentious ruling that is being appealed, online gambling was ruled illegal by the Northern Gauteng High Court last year.
 
Following the ruling, the National Gambling Board said: “…unlicensed interactive gambling activities significantly undermine national policy, legalization and threaten licensed gambling operations by creating an unregulated and untaxed competition.”
 
The Board used the court ruling to threaten action against online gambling operators taking bets from South Africans (see previous InfoPowa reports), scaring away at least one locally-based operator.
 
Complicating the issue still further, the NGB has asserted that there is a difference between ‘interactive gambling’ and ‘online betting.’ While it has been established that ‘online betting’ is still legal in South Africa, penny auction sites would fall under ‘interactive betting’ which at present is apparently not.
 
The Department of Trade and Industry’s last word on the subject – for now at least – is equally confusing: “….any form of online/interactive gambling is illegal in South Africa until the National Gambling Amendment Act of 2008 comes into effect,” the DTI claims.
 
That Act is still making its tortuous and protracted passage through the political system.