But I have to say, this is even worse. Looking at point #4, they actively went out and tried to get as many designers as possible to do free work for them. From their post:
"The response rate was staggering, with around 85% responding and almost an equal amount actually submitting designs. The most time effective way to do this is to download an auto-text completer which allows you to save a message and quickly populate any document with it by selecting a shortcut."
Congratulations, you just figured out how to minimize your time spent while maximizing the hours wasted by the 'losing' designers. Or, in their own words... "For a minimal amount you are able to tap the creative abilities and talents of a multitude of people across the world. Why pay one designer 10 times more for a product you may not like?"
Edit: Not looking to get into a back in forth here, so I would recommend this to anyone who thinks design contests are a good idea: http://www.no-spec.com/faq