Sweepstakes company American Family Publishers agreed Monday to stop using the slogan "You're our newest winner!" in its contest mailings and will pay $1.25 million to California and 25 other states to settle allegations that it misled consumers.
Under the agreement, the company, which uses celebrity spokesmen Dick Clark and Ed McMahon, will pay each state $50,000 and will stop promoting its sweepstakes by using the disputed phrase unless the recipient has in fact won a prize. Consumers who receive its mailings, which include magazine subscription offers, also will be advised that no purchase is necessary in order to enter the sweepstakes.
A spokesman for the California attorney general's office said the state's portion of the award will go to recoup costs of participating in a multi-state task force that began investigating American Family's practices two years ago based on complaints that the sweepstakes were misleading consumers, particularly the elderly.
In January, 88-year-old Victorville resident Richard Lusk traveled to Florida for a second time to collect an $11-million prize he believed he had won after reading the words: "YOU'RE OUR NEWEST $11 MILLION WINNER." Lusk told The Times that he did not see the small print that said he had won only if he had the winning number.
"Our consumer law section [of the attorney general's office] continually talks to other states, and one problem we saw was in these sweepstakes," spokesman Matt Ross said.
In reaching the settlement, Jersey City, N.J.-based American Family, one of the nation's largest sweepstakes operators which is partly owned by Time Warner Inc., admitted no wrongdoing, but said it had cooperated with the states to improve consumer awareness about the sweepstakes, said AFP spokeswoman Margot DeWitt.
Those measures include:
* Prominently displaying the words "no purchase necessary," and money-back guarantee policies.
* Setting a toll-free number and a Web site for consumers to obtain information.
* Informing consumers how to remove their names from AFP's mailing lists.
* Sending personal letters to those who place large orders to remind them that no purchase is necessary.
Ross said consumers who feel they have been cheated can write to the attorney general's office to obtain more information about the settlement.
Seven other states and the District of Columbia were also part of the agreement but will not receive any money because they had not participated in the task force. Those states are Alabama, Montana, New Hampshire, Ohio, Oklahoma, South Dakota and Virginia.
However, the agreement, signed Wednesday, does not include several states that have already sued the company, including Connecticut, Florida and Indiana. Also not included are South Carolina, which is planning to sue, and Maryland, where a lawsuit seeking class-action status has been filed.
Reuters contributed to this report.