Final Sweepstakes Case Closed: Industry Has Changed Its Ways

Seattle - March 8, 2001- A nearly two-year state effort to reform the nation's sweepstakes industry concluded today with a settlement that will require the Reader's Digest Association to pay approximately $200,000 in restitution to Washington consumers.

The settlement by the District of Columbia and 32 states-including Washington-also will require Reader's Digest to make dramatic changes in the way it uses sweepstakes promotions as a sales tool.

The changes already are in place for other major sweepstakes companies that settled with the states last year.

"These settlements have forced these companies to change their misleading business practices and put money back into the pockets of consumers," Attorney General Christine Gregoire said. "That means countless vulnerable consumers will no longer be deceived into believing they are the next big winner."

Under the agreement, Reader's Digest, one of the nation's largest sweepstakes firms, will pay nearly $6.1 million in restitution to the states and $2.1 million in costs and fees. The states will distribute the restitution money among sweepstakes customers who purchased more than $2,500 worth of merchandise in 1998, 1999 or 2000. Washington state's share is estimated at $235,000, which will be distributed among the approximately 290 qualifying Washington residents.

In addition to using sweepstakes as a means of selling magazine subscriptions, Reader's Digest also sells a wide variety of books, videos and audiotapes.

Other sweepstakes companies that previously settled with the states are Publisher's Clearing House (PCH), Time Inc., and American Family Enterprises (AFE).

Like those companies, Reader's Digest will be required to provide clear and conspicuous "Sweepstakes Facts" in contest entry forms. The facts include the odds of winning, and clearly state a person's already remote chances of winning will not be increased by making a purchase. The settlement also requires Reader's Digest to:

• Refrain from claiming that a person has won, or is close to winning;
• Offer a standard means of entering its sweepstakes for free;
• Maintain a toll-free telephone number for consumers who wish to be placed on the company's "Do Not Contact" list concerning future solicitations; and
• Remove persons from its mailing list who buy merchandise at unusually high levels.

The effort to reform the sweepstakes industry began in April 1999, when Gregoire sued Time, AFE and PCH.

Last April, the state settled with another large sweepstakes company, United States Sales Corp., which does business as United States Purchasing Exchange (USPE). Settlements with AFE, PCH and Time followed.

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