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An art competition is basically two things. First it is a way for a gallery or organization to gain exposure to a broad range of new artists and to mount an exhibition or publication of the highest quality from the works submitted. Second it is a way to raise operational funds from the entry fees. The competition is commonly used as a fund raiser primarily by non-profit and artist run galleries. In an era of tight budgets and limited public funding, the competition is a lifesaver for many art institutions.
Most organizations are not making large profits from art competitions. The expense of operating a gallery or art organization is very high. The cost of promotion and exhibition for each competition can consumes up to 70% of all revenues brought in by entry fees. The remaining monies are reinvested into the organization and are eventually consumed by operational costs.
While it is true that the majority of artists who enter the competition will not be chosen as winners, this is no reason for artists to feel cheated if they are among those not chosen. The entry fee is not just a fee, but in fact a donation which contributes to the continuing existence of the organization. It supports activities that will benefit countless artists who otherwise may never have the opportunity to show their works to the public.
Of course with any human endeavor there are exceptions to the rule. There are unscrupulous individuals who operate competitions purely as a profit making venture. These individuals do not have the best interest of the artist at heart, but use artists as a vehicle for self enrichment. To them the art competition is in fact, "a scam". Since your entry fee makes a contribution to the organizations operational budget, you must decide whether or not the competition you enter is run by an organization worthy of your support. This is a determination that must be made by each individual artist.
Mainly, keep in mind that as artists we have all designated a part of our lives to the enrichment of human culture. In this sense we are all working together. To make a contribution to a competition that enables some artists to show their works is a noble and worthwhile cause. However, we must remain aware that the nature of the capitalist society in which we live is one that encourages exploitation. While artists should participate in activities that are helpful to one another, we must remain wary of those who would use artists to help only themselves at our expense.
Finally, when entering a competition follow the prospectus carefully. Do not try to bend the rules. If the entry guidelines say send only four slides, send only four. Sending extra slides may not be looked upon favorably by the jurors. If there is a fee for a minimum number of slides and a charge for additional slides, send only the minimum - or at the most a few extra. Some artists spend a lot of money to send whole sheets of slides thinking that this will increase their chances, yet it may not. Four, six or eight slides are enough for any juror to decide if they like your work and to send more than this is a waste of money. Also - the initial weeding out phase of any competition jury is done with a light box, not a projector. Make sure that your slides are well taken and easy to read when viewed in this manner, if not they may not make it to the projector phase.