Picking a firm from Sortfolio to redesign Signal vs. Noise

37Signals as decided to hire a designer from it's own Sortfolio Pro member accounts to redesign it's blog.
http://37signals.com/svn/posts/2164-picking-a-firm-from-sortfolio-to-redesign-signal-vs-noise

Apparently Oliver Reichenstein finds this outrageous, in twitter posts documented here:
http://www.webstandardistas.com/2010/02/twitter-is-watching.php

I don't really see the problem. 37Signals is also paying the winner $8,500, a fair amount of money for a blog redesign. True, it takes $99 to compete, but some raffles and door prizes require a entry fee, and some photography contests charge admission fees. What's the big deal? I recently paid hundreds of dollars to be considered for an Audie award for an audio production I produced. Or one last example, a friend of mine applied for a job at a game design firm as a sound designer. They gave him a test: to design all the sound for a short in-game video which had all the audio muted. It took him a week--thus costing him more than $99 in lost client work--but he got the job.

True, 37Signals might overlook some great design talent by only looking at the people who are paying to compete, but that's their decision and I don't see anything really wrong with it. There are just too many members and they need some way to sort out the signal from the noise. Just as a package design contest charges an entry fee because they couldn't otherwise afford to review the avalanche of submissions.

Think about what's at stake: 37Signals boasts millions of users. By winning the bid to design for this well-known and respected company, your design credit has a chance at some very good exposure. Plus you get $8,500.

How is this any worse than the business model at http://99designs.com/? As a designer registered at 99designs, you have to actually DESIGN work for prospective clients, and you only get paid if they select your design from among countless others. Makes the 37Signals offer sound like a much better deal to me. With the 37signals promotion, you pay $99 to have your portfolio considered. With 99designs you actually have to design the project first, on your own time;time which may be valued at way more than $99.

I think 37signals are free to do business however they want, and I personally don't see the outrage here.