The Reader’s Digest Association Inc. reached a settlement with 32 states and the District of Columbia regarding its sweepstakes mailing practices. Under the terms of the agreement, the Pleasantville, NY-based marketer will make changes to its mailing packages and issue refunds to "high activity" customers. The company routinely uses sweepstakes mailings to induce consumers to subscribe to its magazines or purchase its leisure products.
The agreement, which was announced by California Attorney General Bill Lockyer, calls for Reader’s Digest to give $6 million in refunds to customers that made more than $2,500 in purchases during the company’s fiscal 1998, 1999 or 2000 years. According to Lockyer’s office, 1,890 California customers are included in that group. Reader’s Digest will be responsible for contacting the consumers that fall into this category.
The company will also pay more than $2 million in attorneys’ fees and investigation costs.
The settlement also calls for Reader’s Digest to post a "Sweepstakes Facts" notice within its mailings. The notice will inform consumers that making a purchase won’t help the consumer’s chances in winning the sweepstakes, that purchase is not required to enter, and the odds of winning a prize.
According to the California Attorney General’s statement, Reader’s Digest will not send any mailings to any high activity customers unless the firm makes contact with the customer and cautions against inappropriate purchases. Reader’s Digest will also create a do not promote list.
Going forward, Reader’s Digest will identify and send special letters to individuals who spend more than $1,000 in a six month period telling them they are not required to make purchases in order to have a chance to win the sweepstakes, that making a purchase will not improve their chances of winning and that all entries have the same chance to win whether or not the entry is accompanied by a purchase.
Reader’s Digest also agreed:
* that future mailings will contain separate entry forms for skill contests and sweepstakes contests, that nothing on the sweepstakes entry form will refer to the skill contest and that there will be a clear and conspicuous statement telling consumers that they can enter the sweepstakes without also entering the skill contest
* to clearly disclose to consumers if automatic renewals are being used for any subscriptions made. The company also will provide advance notice to consumers that the renewal will take place unless the consumer cancels, and provide a notice with the first billing that a consumer can still cancel and receive a full refund.
* to severely restrict its use of "customer only" sweepstakes.
The multistate settlement is the fifth signed by a major sweepstakes company. In 2000 US Sales Corporation (also known as USPE), Time Inc., American Express Publishing Corp., and Publishers Clearing House also agreed to use fact sheets and issue refunds.
The other states involved in the settlement are Alabama, Alaska, Arkansas, Georgia, Hawaii, Idaho, Illinois, Indiana, Kansas, Louisiana, Mississippi, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Rhode Island, South Carolina, South Dakota, Tennessee, Utah, Virginia, Washington and Wyoming.
