American Family Enterprises, Jersey City, NJ, said yesterday that the U.S. District Court of New Jersey has preliminarily approved a $33 million agreement to settle the outstanding legal claims of all class action and other private lawsuits filed against the sweepstakes marketer.
The decision to settle without admission of any wrongdoing enables the company, which filed for Chapter 11 protection this fall, to avoid costly and protracted litigation by implementing a variety of consumer-oriented initiatives and establishing a consumer fund.
The settlement relates to all sweepstakes mailings sent by American Family Publishers since Jan. 20, 1992, and provides for a consumer fund of $33 million, including a special sweepstakes of $1 million. The $1 million fund, to be awarded in 10 prizes of $100,000 each, will be available to consumers who certify through a claims process that they thought purchasing magazines or merchandise was necessary to win a prize or would enhance their chances of winning. AFP also will pay legal fees, administrative and notice costs associated with the settlement.
As part of the settlement, the company agreed to make several changes to its mailings, including:
* Include clear and conspicuous “No Purchase Necessary” messages in the official rules and the copy of the mailings.
* Print the rules in 8-point type and in such a way that consumers may retain them after entering the sweepstakes.
* Clearly disclose the estimated odds of winning the sweepstakes prizes in the rules.
* Make no representation that the recipient is a winner unless the recipient is a winner.
* Use headline copy that is clear and readily understandable.
* Don’t mail solicitations that, when viewed in their entirety, simulate government documents.
* Notify consumers as to how they can be removed from AFP’s mailing lists.
* Clarify the deadlines for returning sweepstakes entries.
* Make no representation that a recipient’s order history enhances chances of winning the sweepstakes.
* Implementing a program of communicating with consumers who enter frequently to remind them that no purchase is necessary to enter or win.
The settlement resolving the pending litigation, along with AFE’s restructuring of its finances and operations, is a key element of the company’s strategy to successfully rebuild its business.
Consumers are not required to take any action at present. As ordered by the court, official notice of the terms of the settlement will begin in the first quarter of next year. In addition, AFE has set up a Web site (www.afpsettlement.com) and is offering a toll-free number (888/469-5408) to consumers who wish to obtain a claim form.
