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March 9, 2001

Reader's Digest to Reform Deceptive Sweekstakes Mailings

Company to Make Refunds to 662 New Yorkers

Albany, NY (SafetyAlerts) - New York Attorney General Eliot Spitzer today announced a settlement with one of the nation’s largest sweepstakes mailers, a settlement that marks the fourth industry agreement in one year providing dramatic reforms and refunds for consumers.

The Reader’s Digest Association - a Westchester County company - settled investigations by 32 states and the District of Columbia regarding its deceptive sweepstakes marketing practices.

"Misleading sweepstakes entries have tricked too many consumers into unnecessary purchases for far too long," Spitzer said. "With this settlement, a major sweepstakes marketer has agreed to significant reforms that will send a strong message to the industry’s members that the Attorneys General are watching them closely."

The agreement signed by Reader’s Digest - based in Pleasantville - and the Attorneys General of 32 states and the District of Columbia establishes a fund of over $6 million to be used for payments to consumers who were high activity sweepstakes customers. In addition, Reader’s Digest will pay the states approximately $2 million for the costs of the investigation.

In New York State, 662 consumers who spent $2,500 or more in any of the past three years between July 1997 and June 2000, will be eligible to share approximately $500,000 in restitution. Some 7,700 consumers nationwide are eligible to receive restitution. New York, one of the lead states in the negotiations with Reader’s Digest, will receive $100,000 in costs.

Reader’s Digest sends out millions of pieces of mail annually providing consumers with the opportunity to subscribe to its magazines, or to buy a variety of books, video tapes or audio tapes. These mailings also offer the opportunity to enter a sweepstakes, which sometimes is combined with a skill contest offer requiring the recipient to buy something to enter the contest.

The terms of the settlement with Reader’s Digest require that all sweepstakes mailings provide a clear and conspicuous "Sweepstakes Facts" disclosure to consumers. The Sweepstakes Facts will include statements that buying won’t help the consumer win, that the consumer has not yet won, that the consumer doesn’t have to buy anything to enter the sweepstakes. The Sweepstakes Facts will also disclose the odds of winning a prize.

Spitzer pointed out that in the past, some consumers in New York State and elsewhere, particularly older people, have purchased the products in sweepstakes offers because they believed such purchases would enhance their chances of winning.

Reader’s Digest also has agreed to:

  • Not state misleadingly that a consumer is the winner or about to become the winner of a sweepstakes, not tell consumers that they have a better chance of winning a sweepstakes than they actually do, and not represent that the sweepstakes package has been sent by special courier or special class mail, if it has not;
  • Discontinue soliciting any future "high activity customer" unless the company first contacts that customer and determines that he/she is not buying under the mistaken belief that buying will help him or her win or for any other inappropriate reason;
  • Establish a "Do Not Contact List" that requires the company not send sweepstakes or skill contest solicitations to customers on the list;
  • Provide separate entry forms for skill contests and sweepstakes contests, and include no reference to a skill contest on any sweepstakes entry form;
  • Clearly disclose when magazine subscriptions are renewed automatically, and provide notice of each renewal so that the consumer may cancel the subscription; and,
  • Severely restrict the use of "customer only" sweepstakes.

This agreement exemplifies the aggressive action taken by Attorneys General across the nation against deceptive sweepstakes. In 1999, public hearings on sweepstakes concerns were held in Indianapolis, followed by a report issued by the National Association of Attorneys General strongly recommending that sweepstakes marketers include a standardized "Sweepstakes Facts Sheet" with sweepstakes mailings to help consumers better understand contest odds and that no purchase is required to win.

Other settlements with sweepstakes marketers include: United States Sales Corporation of Northridge, California, which does business as the United States Purchasing Exchange (USPE) (April 2000); Publishers Clearing House of Port Washington, New York (August 2000); and Time Inc., which promotes its sweepstakes under the Guaranteed & Bonded trade name (August 2000).

Joining Spitzer in this settlement with Reader’s Digest are the Attorneys General from the following states: Alabama, Alaska, Arkansas, California, Georgia, Hawaii, Idaho, Illinois, Indiana, Kansas, Louisiana, Mississippi, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Rhode Island, South Carolina, South Dakota, Tennessee, Utah, Virginia, Washington, Wyoming, and the Corporation Counsel of the District of Columbia..

This case was handled by Assistant Attorney General Shirley Stark of the Consumer Frauds and Protection Bureau.

Individuals with complaints regarding sweepstakes are encouraged to contact Attorney General Spitzer’s consumer help line at 800- 771-7755.

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