If you try to get any of your writing published, you soon learn that there are a lot of con artists in the industry. They pretend to be agents or publishers, but in fact they make their money by charging fees to would-be authors, not by selling book rights to publishers or books to the public.
Preditors and Editors is the best-known site which looks into these scammers. Preditors & Editors gives a rating of ‘Not Recommended’ to any publisher or distributor who “charges a reading fee, regardless of nomenclature.” They give the same rating to any agent who “charges a fee up front, regardless of nomenclature or reason.”
And yet it seems to be standard practice for writing competitions to charge a fee for entries.
It seems that the main difference between writing competitions on the one hand, and scamming pseudo-publishers or -agents on the other, is that the people who end up with the money from writing competitions aren’t making their living by doing so. In fact often the money goes to non-profit organisations.
However I’m not sure that’s enough to make fees for writing competitions OK. The argument that no one’s making a living charging fees seems to be implying that amateur cons aren’t cons at all.
I have some sympathy with fees as fund-raisers for non-profits. However the fees aren’t presented as a form of donation to a good cause. Entry fees are standard practice regardless of who’s running the competition. Further, it’s almost never stated upfront who ends up with the money, as would happen with a genuine fund-raiser (“buy a ticket so that Crosstown Hospital can get a new kidney machine”), you don’t seem to be able to claim the fee as a donation for tax, and so on.
In short, it seems to me that competitions are judged by a different standard, without any obvious good reason.