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 nations largest
sweepstakes mailers, a settlement that marks the fourth industry agreement in one year
providing dramatic reforms and refunds for consumers.
The Readers 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 industrys members that the Attorneys General
are watching them closely."
The agreement signed by Readers 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, Readers 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
Readers Digest, will receive $100,000 in costs.
Readers 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 Readers
Digest require that all sweepstakes mailings provide a clear and conspicuous
"Sweepstakes Facts" disclosure to consumers. The Sweepstakes Facts will include
statements that buying wont help the consumer win, that the consumer has not yet
won, that the consumer doesnt 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.
Readers 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
- Provide separate entry forms for skill contests and
sweepstakes contests, and include no reference to a skill contest on any sweepstakes entry
- 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
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
Joining Spitzer in this settlement with Readers
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
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 Spitzers consumer help line at 800-
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