Publishers Clearing House Settles Suits

For years now, letters from Publishers Clearing House have arrived in mailboxes nationwide with what looked like checks for large amounts and enthusiastic congratulations — “You are a winner!”

But officials in two dozen states and the District of Columbia say that consumers have really been the losers, and announced an $18 million settlement with the direct marketer to curb its allegedly deceptive sweepstakes promotions.

Tuesday’s settlement, stemming from lawsuits and investigations launched by the states over the past two years, calls on Publishers Clearing House to change many of its practices and provides money to reimburse some consumers.

The money will go to the states to reimburse customers who spent at least $2,500 with PCH between 1997 and 1999, the years during which investigations took place.

Starting to Correct the Wrong “We believe that this agreement will help put an end to to the horror stories of consumers, especially seniors, buying thousands of dollars in magazine subscriptions that they don’t need and can’t afford in the mistaken belief it will help them win a grand prize,” said Attorney General Eliot Spitzer of New York, one of four states that lead the push for a settlement.

Washington State Attorney General Christine Gregoire agreed, saying pitches from Publishers Clearing House and other direct marketers lure people in by giving them false hope.

“Hopefully, the settlement we’ve reached today will bring an end to a practice that has left too many citizens nearly penniless and their families devastated,” Gregoire said.

Attorneys general in California and Ohio also played active roles in negotiating the settlement.

Clear-cut Rules The settlement with the states imposes a number of conditions on Publishers Clearing House, which sells magazine subscriptions and collectibles by mail. Consumers have never been required to make such purchases to win one of the company’s giveaways or to improve their chances of doing so.

But the pact with the state officials is designed to make that clearer. The company will now be prohibited from using “winner” proclamations, sending simulated checks or requesting information from consumers such as asking when they’ll be home that would lead them to believe they had won a prize.

The mailings must also contain a conspicuous “Sweepstakes Fact Box” offering information about the odds of winning and the end-date of giveaways, and disclaimers telling consumers that buying something won’t help them win.

The Port Washington, N.Y.-based company also agreed to maintain a list of people who do not want to receive its mailings and to contact its most active customers by mail and telephone to ensure they understand the promotions and are not under financial duress.

Executives for Publishers Clearing House embraced the agreement even as they defended past practices.

“We believe our mailings have always been clear to our many customers. Nevertheless prolonged litigation is very expensive,” PCH senior vice president Bill Low said. “We needed to resolve this matter and we have, going the extra mile by agreeing to pay for consumer restitution and education and by adopting high standards that will make our advertising even clearer for the public.”

Low said he expected the settlement will pave the way for similar agreements with other states not part of Tuesday’s agreement.

More Changes Needed But in Arkansas, a spokesman for Attorney General Mark Pryor said the settlement with the 24 states didn’t go far enough. It wants Publishers Clearing House to make more changes in its marketing practices and wants refunds promised to people who spent less than $2,500 — the threshold for the agreement among other states.

“We’re not in a position to settle,” Pryor spokesman Michael Tighe said. “We don’t feel there was a lot of ground gained in changing the industry practice.”

The states participating in the settlement are Alaska, Alabama, California, Georgia, Hawaii, Idaho, Illinois, Louisiana, Mississippi, Montana, Nebraska, Nevada, New Hampshire, New Mexico, New York, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Utah, Virginia, Washington and Wyoming. The agreement also includes the District of Columbia.

Educating Potential Winners Some consumers hailed Tuesday’s settlement, while expressing reservations about how much it will protect others.

“The most important thing is that they’re stopping them from exploiting the elderly and others who can’t tell its a scam,” said Joe Questore of Eatontown, N.J.

Questore said one of his relatives, an 85-year-old Long Island man, had accumulated more than $20,000 in debt trying to pay for items from Publishers Clearing House and other marketers. The debt grew so large that the retiree was using most of his pension and social security checks to cover the bills and was forced to get a job as a janitor.

Nancy Johnston of Clifton Park, N.Y., said her mother, Virginia Bruce, was similarly taken in and spent several thousand dollars on items from the company. Bruce, who is in her 80s, ordered magazines focusing on mechanics and woodworking even though she is not interested in either, Johnston said. She also stayed at home on days when PCH letters claimed a representative might visit, hoping they’d deliver a check.

“I’m wary that Publishers Clearing House will still find a creative marketing way to induce people to participate,” Johnston said. “But I’m glad something that people pay more attention when they get these contest envelopes.”