Leading Sweepstakes Company To Make Major Changes In Disclosures
Attorney General Spitzer today announced a multi-state settlement that requires one of the nation’s largest sweepstakes companies to make dramatic changes in consumer disclosures and provide millions of dollars in refunds to its customers.
Spitzer and the Attorneys General of 47 other states and the District of Columbia have reached an agreement with United States Sales Corporation, of Northridge, California, which does business as the United States Purchasing Exchange (USPE). The agreement requires USPE to provide clear and conspicuous "Sweepstakes Facts" containing prize information in grid-format on the entry form. USPE also agreed to provide a statement that a consumer has not yet won, a calculation of the odds of winning a prize, and a notice that a product purchase is not required in win.
"This is a major victory for consumers throughout the nation, especially senior citizens who tend to be exploited more frequently by sweepstakes appeals," Spitzer said. "This settlement provides important reforms and disclosures ensuring the company’s future sweepstakes will more responsibly market its products and offers. The settlement also provides needed relief to the many consumers who were duped in the past."
Spitzer said some consumers in New York State and elsewhere, particularly older people, have purchased the products because they believed the purchases would enhance their chances of winning.
The settlement establishes a fund of $30.4 million for refunds to consumers nationwide who spent at least $1,870 with USPE in any one of the following years: 1997, 1998 or 1999. In New York, more than 2,000 people spent more than $17.8 million, an average of $8,329. Refunds will be provided on a pro-rata basis.
USPE also will pay $1.3 million for the costs of the investigation and will set aside an additional $3.6 million to pay for the cost of administering the refund program.
In addition to the restitution, USPE has agreed to discontinue sweepstakes mailings to any person who makes 25 purchases or spends more than $935 in a year in response to sweepstakes offers in order to stop unnecessary purchases by high activity customers. The company will improve its disclosures to consumers regarding no purchase being necessary to enter its sweepstakes and how consumers can enter without having received a sweepstakes offer from the company.
USPE also will contact so-called "high activity" customers with a separate letter to let them know that they can enter the company’s sweepstakes as often as they like and not have to purchase anything to win a prize.
The settlement also requires USPE to:
- offer only a single, standard means of entering sweepstakes, regardless of whether a purchase is made;
- not represent that a consumer received a sweepstakes offer because he/she is a customer or that consumers may receive additional sweepstakes offers if they remain a customer;
- not represent that a consumer has a better chance of winning a sweepstakes than others;
- not use personalized simulated checks to represent sweepstakes prizes in its solicitations;
- fully disclose the nature and value of any bonus items offered to purchasers if any such items are described;
- ensure that all sweepstakes have a single response deadline, rather than numerous intermediate response deadlines; and
- maintain a toll-free telephone number for consumers to call if they wish to be placed on the company's "Do Not Contact" list and not receive any future solicitations.
Joining Spitzer in this settlement were the attorneys general from Alabama, Alaska, Arizona, Arkansas, California, Colorado, Delaware, District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, and Wyoming.
Individuals eligible for refunds will be contacted directly within several months.
This case was handled by Assistant Attorney General Shirley Stark of the Consumer Frauds and Protection Bureau.