Publishers Clearing House Settles Suits

N E W  Y O R K, Aug. 23, 2000 -- For years now, letters from Publishers ClearingHouse have arrived in mailboxes nationwide with what looked likechecks for large amounts and enthusiastic congratulations — “Youare a winner!”

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

Tuesday’s settlement, stemming from lawsuits and investigationslaunched by the states over the past two years, calls on PublishersClearing House to change many of its practices and provides moneyto reimburse some consumers.

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

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

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

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

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

Clear-cut RulesThe settlement with the states imposes a number of conditions onPublishers Clearing House, which sells magazine subscriptions andcollectibles by mail. Consumers have never been required to makesuch purchases to win one of the company’s giveaways or to improvetheir chances of doing so.

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

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

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

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

“We believe our mailings have always been clear to our manycustomers. Nevertheless prolonged litigation is very expensive,”PCH senior vice president Bill Low said. “We needed to resolvethis matter and we have, going the extra mile by agreeing to payfor consumer restitution and education and by adopting highstandards that will make our advertising even clearer for thepublic.”

Low said he expected the settlement will pave the way forsimilar agreements with other states not part of Tuesday’sagreement.

More Changes NeededBut in Arkansas, a spokesman for Attorney General Mark Pryorsaid the settlement with the 24 states didn’t go far enough. Itwants Publishers Clearing House to make more changes in itsmarketing practices and wants refunds promised to people who spentless than $2,500 — the threshold for the agreement among otherstates.

“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, SouthDakota, Utah, Virginia, Washington and Wyoming. The agreement alsoincludes the District of Columbia.

Educating Potential WinnersSome consumers hailed Tuesday’s settlement, while expressingreservations about how much it will protect others.

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

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

Nancy Johnston of Clifton Park, N.Y., said her mother, VirginiaBruce, was similarly taken in and spent several thousand dollars onitems from the company. Bruce, who is in her 80s, ordered magazinesfocusing on mechanics and woodworking even though she is notinterested in either, Johnston said. She also stayed at home ondays when PCH letters claimed a representative might visit, hopingthey’d deliver a check.

“I’m wary that Publishers Clearing House will still find acreative marketing way to induce people to participate,” Johnstonsaid. “But I’m glad something happened...so that people pay moreattention when they get these contest envelopes.”