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(SACRAMENTO) – Attorney General Bill Lockyer today announced that California and 23 other states have reached a settlement to require Publishers Clearing House, one of the nation's largest sweepstakes mailing operations, to refund over $16 million to "high-activity" customers and make dramatic changes in what it tells consumers about their chances of winning.
"Sweepstakes companies cannot continue to mislead consumers as they have done in the past," Lockyer said. "PCH for years has targeted the elderly and others easily deceived, inundating them with deceptive mailers that are nothing more than sales pitches for magazines."
Publishers Clearing House was sued in January after California and the other states failed to reach a negotiated agreement with the company based in Port Washington, N.Y. Over 100 million pieces of mail are sent each year by PCH to consumers nationwide, offering a chance to win sweepstakes prizes that include $10 million on Super Bowl Sunday. The consumer protection lawsuit stated that consumers have been misled into believing they have already won or are on the way to winning the grand prize when the actual odds of winning are no better than one in 50 million – a fact often only disclosed in small type buried in the middle of the "Rules."
Under the settlement, Publishers Clearing House will pay California, the other states and the District of Columbia over $18.48 million, most of which will be refunded to consumers who made purchases of $2,500 or more in 1997, 1998 or 1999. The payment includes $2.3 million in costs and legal fees, but does not include the up to $2 million cost PCH will pay for administering the refund program. The settlement also requires PCH to make new public disclosures and curb solicitations to high-activity consumers.
It is estimated that more than 5,000 high-activity Californians will receive about $4.96 million in refunds under the settlement. Overall, the 23 states in the settlement represent more than 46 percent of the total United States population.
The PCH settlement is the second involving sweepstakes companies. In April, California and 47 other states settled a consumer protection complaint against United States Sales Corp., of Northridge, Calif., which does business as United States Purchasing Exchange and USPE. The Sweepstakes Fact Sheet developed for use by USPE will be used by PCH.
"Consumers should know that buying magazines and other goods from the sweepstakes company doesn't really improve their chances of getting the Prize Patrol to their front door," Lockyer said. "Publishers Clearing House now will be required to give consumers clear disclosures in all mailings. PCH also must stop luring customers with a direct ‘You are a Winner' pitch unless the consumers have indeed won."
The settlement with PCH was reached with California, Alaska, Alabama, Georgia, Hawaii, Idaho, Illinois, Louisiana, Mississippi, Montana, Nebraska, New Hampshire, New Mexico, Nevada, New York, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Utah, Virginia, Washington, Wyoming and the District of Columbia.
Under the terms of the Final Judgment filed in San Diego County Superior Court:
* PCH's mailers must convey that the consumer has not yet been determined to be a winner, and any qualifying language must be printed in equal prominence with any "winner" language.
* PCH will identify and send special notices to individuals who spend more than $1,000 annually that they are not required to make purchases in order to have a chance to win the sweepstakes. Consumers who make purchases of $2,500 or more annually will be surveyed to ensure the purchaser understands they do not have to make purchases to participate in the sweepstakes.
* All PCH sweepstakes mailings will have to provide a clear and conspicuous "Sweepstakes Facts" disclosure to consumers. The Sweepstakes Facts will include a statement that buying won't help the consumer win the sweepstakes, that the consumer has not yet won, that the consumer doesn't have to buy anything to enter the sweepstakes, that the consumer can enter as often as s/he wishes and the odds of winning a prize.
* Among other things, PCH will be prohibited from misrepresenting the chances of winning a prize; misrepresenting that a sweepstakes offer is being sent by special delivery when sent by bulk mail or that any communication is from a state or federal government or other official entity; representing that an item is a "prize" or "award" or use the term "sweepstakes" when it offers the same items or items of the same value to most people; and requesting certain information from recipients of sweepstakes mailers, such as where the person will be when the Prize Patrol comes to deliver the prize or on Super Bowl Sunday.
* PCH also is prohibited from using documents designed to simulate checks without clear disclaimers that they are not checks. Beginning January 1, 2001, a new tougher provision of California law (AB 1816) sponsored by Attorney General Lockyer and authored by Assembly Member Howard Wayne of San Diego, will prohibit sweepstakes mailers, such as PCH, from using simulated checks at all in California.