You know, this is a case where I think that the laws, if being broken, should be broken.
I think that these sites are more like "submitting a request for comps and receiving them" more than a "contest."
Now if people are running these "contests" and not fulfilling their end of the bargain, then they are bastards and should be caned.
But for people in developing countries with great design skills (or people in developed countries that are looking for experience) these "contests" provide a much greater potential for income that they normally wouldn't get.
I think that a lot of this whining about the legality and "morality" of these sites and contests by the establishment (in this case the design firms and professional designers) is simply a case of them being afraid of lower cost alternatives (that might be better than them!).
This may be another case of p2p and digital music vs. the recording industry and the RIAA. There will be some losers (napster) but the cat is already out of the bag.