Publishers Clearing House, Port Washington, NY, said yesterday that it would pay $18.4 million in fines and restitution to settle lawsuits that had been filed by 23 states and the District of Columbia. The company, one of a handful of sweepstakes companies hit by lawsuits this year, also agreed to make changes in its offers.
PCH was accused of using deceptive marketing practices in its mail promotions, which the states alleged fooled people into believing that they had won prizes or that purchasing products or magazine subscriptions would increase their chances of winning.
The company agreed to pay $16.1 million in restitution to consumers who spent $2,500 or more on subscriptions and merchandise that they purchased through PCH mailings in any one year from 1997 to 1999, according to Sally Gustafson, senior assistant attorney general for Washington state. PCH also will pay $2.3 million in fines that will be used to reimburse states for the cost of the investigation.
The settlement follows the enactment April 13 of the Deceptive Mail Prevention and Enforcement Act, a new federal law that places restrictions on sweepstakes marketing, sets financial penalties for violations, and gives the U.S. Postal Service’s postmaster general the authority to investigate and stop deceptive mailings.
Gustafson said the settlements PCH reached with the states contain more specific restrictions.
In a consent decree settling the state lawsuits, PCH agreed to:
• Include a “sweepstakes facts” insert in all its mailings stating a person’s odds of winning and providing a clear statement that a person’s odds will not be improved by making a purchase.
• Not represent that a person has won or is close to winning.
• Offer a standard means of entering a sweepstakes for free.
• Refrain from claiming that consumers received sweepstakes offers because they were customers or that they may receive additional sweepstakes offers if they remain customers.
• Refrain from using personalized, simulated checks to represent sweepstakes prizes.
• Fully disclose the nature and value of bonus items offered to purchasers.
• Maintain a toll-free telephone number for consumers to call if they wish to be placed on the company’s do-not-contact list.
• Remove from its mailing list people who buy merchandise at unusually high levels.
The status of additional state lawsuits pending against PCH was not immediately clear. Earlier this year, it was reported that 26 states had filed suits against the company.
PCH did not immediately return calls seeking comment.
In a press release, Bill Low, senior vice president and general counsel at PCH, said the company believes that its mailings “have always been clear to many of our customers. Nevertheless, prolonged litigation is very expensive and no company can withstand separate proceedings with so many states.”
Other sweepstakes firms that settled state lawsuits this year include United States Purchasing Exchange and American Family Enterprises.
Gustafson said Washington state also is in discussions to settle a pending lawsuit against Time Inc., which runs the Guaranteed & Bonded sweepstakes.
