Attorney General Richard Blumenthal today announced that sweepstakes giant Publishers Clearing House (PCH) will pay $34 million in consumer restitution, penalties, and fees under a groundbreaking agreement with Connecticut and 25 other states. The agreement, which settles Connecticut's lawsuit against PCH, also requires PCH to make significant and permanent reforms in the way it conducts future sweepstakes contests. Attorney General Blumenthal helped to lead the negotiations.
"Consumers have finally won a sweepstakes contest -- by stopping the lies, recovering money lost, and forcing fundamental reform. We are stopping the slick tricks and pitches that prey on senior citizens and others particularly susceptible to these deceptive promotions," Blumenthal said. "This settlement bans any misstatement, big or benign, any inducement to buy magazines or merchandise, and any discrimination against non-buyers. Besides the millions in money back for past victims, we are forestalling future losses -- halting lies that lead to false hopes. All consumers are winners today."
The settlement resolves the lawsuit filed by Blumenthal in March 1999, which alleges that PCH's solicitations were primarily designed to induce consumers to order magazines and merchandise by implying that the recipient had won or had a strong likelihood of winning a large cash prize or that consumers who order merchandise have an improved chance of winning. The solicitations also implied that a quick response would improve a consumer's chance of winning.
"PCH must acknowledge, apologize, and pay for its past wrongs, but also institute reforms that provide a model for settling other similar lawsuits we've brought against other sweepstakes promoters. We will pursue vigorously our ongoing actions against Readers Digest and Time," Blumenthal said. "This settlement does far more in money and reforms than the agreement last summer -- reflecting the tough stand we took in tenacious bargaining over the past 12 months. This modern day snake oil will stop. It was worth the wait."
PCH must pay restitution totaling $19 million to consumers who were deceived by their past practices. While a formula for distributing the restitution still must be resolved by the states, Connecticut should receive approximately $500,000 for its consumers. PCH will also pay $15 million in civil penalties, litigation costs and expenses.
In addition to the monetary payments, PCH must fundamentally change in its business practices. Among the changes, PCH will:
- Halt any and all false statements, no matter how small or seemingly insignificant, such as claims that the Prize Patrol has personal feelings about Connecticut consumers, suggestions that consumers' have an increased likelihood of winning based on their ordering history, or that the Prize Patrol is enroute to a consumer's house;
- Sever any connection between ordering magazines or merchandise and entering the sweepstakes;
- Use a single contest entry form, separate from the merchandise or magazine order forms, so as to prevent discrimination against non-purchasers. In the past, customers who did not buy magazines or other products were forced to search for a small, plain entry card among the various colorful pieces PCH included with the contest solicitation. The practice led consumers to conclude that those who ordered had a better chance to win than those who did not;
- Acknowledge and apologize for past abuses and engage in corrective advertising, reminding consumers that purchases do not improve the consumer's odds of winning; and,
- Establish safeguards to protect the most vulnerable consumers, such as reviewing the purchasing habits of the consumers who make frequent purchases and eliminating from its mailing list those consumers who are determined to be confused or disoriented or have excessive purchases.
Connecticut, along with the other states involved in today's announcement, rejected an earlier multi-state settlement reached last summer. The earlier settlement provided substantially less money in penalties and fees ($15 million less) and did not contain the critical changes in business practices required by today's settlement. Connecticut has similar actions pending against Readers Digest and Time, Inc., which were filed in 1999 and 1998, respectively.
In addition to Connecticut, the agreement with PCH was approved by the Attorneys General of Arizona, Arkansas, Colorado, Delaware, Florida, Indiana, Iowa, Kansas, Kentucky, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, New Jersey, North Carolina, Oregon, Pennsylvania, Rhode Island, Tennessee, Texas, Vermont, West Virginia, and Wisconsin.