For me, it’s not really about how likely someone is to come up with an amazing patentable idea, it’s about how the company treats the designers who are entering. Whilst it’s true that this is a pretty typical set of rules, it doesn’t have to be done that way. In Nokia’s recent headphones competition the company received non-exclusive rights, meaning you were free to do whatever you wanted with your work, including selling it to someone else. Other competitions only claim rights to those designs selected as winners, ie only to those designs which have been paid for by awarding a prize. In any contract, you have to assume that everything that’s written is there for a reason. LG chose to word their contract in this way, I think it’s reasonable to question why.
In any case, LG are not just claiming patent rights, they are claiming that ALL intellectual property rights transfer to them. That could include styling, as well as a pattern, a graphic, even the name of a design. I don’t think anyone could argue that all possible styles of mobile phone have already been done.