Sweepstakes Firm to Pay Out $33 Million in Class-Action Cases

Sweepstakes company American Family Enterprises has agreed to stop blanketing American mailboxes with letters claiming “You Are a Winner!” under a $33-million settlement of lawsuits claiming that consumers were duped into buying merchandise.

The settlement covers up to 35 million people who were allegedly deceived by the sweepstakes plugged by Dick Clark and Ed McMahon, and resolves dozens of class-action lawsuits. Consumers who file claims by May 5 should begin receiving checks from the company by late summer.

Under the settlement, American Family Enterprises agreed to change its marketing literature to make it clear that consumers don’t have to buy magazine subscriptions or other merchandise to win big prizes.

American Family Enterprises, which is operating under Chapter 11 bankruptcy protection, also agreed to make massive changes in the mailings that urge people to enter sweepstakes and buy magazine subscriptions.

The settlement also gives millions of people a chance to win $100,000 in a mini-sweepstakes. The company set aside $1 million of the settlement as a jackpot for 10 winners. Anyone who bought merchandise from a sweepstakes mailing after January 1992 is eligible.

American Family’s new sweepstakes literature will include “no purchase necessary” in bold type to make the rules clear to consumers and won’t use language such as “you are a winner” unless the recipient has actually won something.

The Jersey City, N.J.-based company also agreed to provide estimated odds of winning the sweepstakes and to print contest rules in larger type, instead of the small print that lawyers said misled people into thinking they had won, or needed to buy something to win.

Most of the consumers spent less than $100 on merchandise, although some spent thousands of dollars, plaintiff’s lawyer Frank Jakes said.

American Family Chairwoman Susan Caughman said the settlement shows the company’s “commitment to maintaining the trust and confidence of consumers.”

The U.S. Senate passed legislation last month that would require sweepstakes sponsors to make it clear that contestants do not need to buy their products to win big prizes.

A federal judge approved the settlement on Thursday. Company officials said the class-action settlement would not disrupt its sweepstakes, including a $10-million drawing scheduled for Jan. 31.

In separate agreements over the last year, the company paid $6.9 million to 40 states and the District of Columbia to resolve similar allegations on sweepstakes advertising. Another major sweepstakes operator, Publishers Clearing House, has been sued by nine states over its advertising.

Consumers who want a claim form to participate in the settlement can call (888) 469-5408 or go to https://www.afpsettlement.com.