Senators Come Down Hard on Sweepstakes Companies

Defending their contests to outraged senators, the companies that flood U.S. homes with sweepstakes promotions insisted Tuesday that most Americans know they can win without buying anything.

Four industry executives testified about their voluntary efforts to clearly state the rules and odds--and to delete from mailing lists vulnerable Americans whom companies are now trying to identify.

The longer the defense continued, the more intense was the bipartisan criticism from members of the Senate permanent subcommittee on investigations. Panel members confronted company officials with mailings that said, “Open your door to $31 million on Jan. 31,” “It’s down to a two-person race for $11 million” and “Yes, reward entitlement granted and guaranteed.”

Sen. Susan Collins (R-Maine), chairwoman of the subcommittee, said she was “absolutely stunned” by statements that no “reasonable person” would be misled by headlines that appear to declare someone a sweepstakes winner when the odds are minuscule.

By the hearing’s conclusion, senators said they were more convinced than ever that tough federal legislation is needed to regulate the mailings. Collins, who faced not only the witnesses but a room packed with powerful Washington lobbyists, said she is “gaining co-sponsors every day” for her legislation that would regulate the mailings and impose stiff fines for violations.

“The fact that these companies have hired such high-powered lobbyists . . . shows how much money is at stake and how profitable the business is,” she said. “My hope is we’ll be able to prevail over any lobbying.”

The industry representatives said they would support federal regulation but wouldn’t commit to specific provisions such as using the same size type for headlines that suggest someone is a winner and the notice saying that those not purchasing anything have an equal chance to win.

On Monday, the committee heard accounts of elderly people who kept buying magazines and merchandise they didn’t need in pursuit of a grand prize. Tuesday, lawmakers heard the defense from Naomi Bernstein, vice president of marketing services for American Family Enterprises; Deborah Holland, senior vice president of Publishers Clearing House; Elizabeth Long, executive vice president of Time Inc.; and Peter Davenport, senior vice president of Reader’s Digest Assn.

Senators were especially critical of a Publishers Clearing House letter that quoted two company officials supposedly discussing how they could get a valued customer, Eustace Hall, a prize. “There must be something we can do,” one official was quoted as saying.

Hall, a committee witness on Monday, broke down in tears during his appearance and told the panel that he thought the letter was a personal one. In fact, said Holland, the letter was sent to 9 million recipients, with only the names changed.

Holland said the letter was “perfectly fine” and called it “a dramatization of an actual conversation that did take place” among company officials.

Sen. Carl Levin (D-Mich.) told her: “You lied to a customer” by suggesting that executives had personal discussions about him. “That letter is purposely a lie . . . purposely false . . . purposely misleading, purposely deceptive.”

“The point of our mailings is not to convince people they’ve won a sweepstakes, but rather to be excited about the possibility of winning and to consider our products,” Bernstein said.

Holland said Publishers Clearing House supports federal standards, a public-private partnership between government and industry to resolve any confusion and protection programs for those who become addicted to sweepstakes without understanding the rules.

Davenport said a study by Reader’s Digest “strongly indicates that the vast majority of . . . customers understand . . . that no purchase is necessary to enter.” He said the sweepstakes are “simply a marketing tool,” just like a department store promotion to lure customers inside.

Sen. Richard Durbin (D-Ill.) told American Family Enterprises’ Bernstein it was misleading to state in big headlines that there was a “two-person race for $11 million” when in fact the odds of winning were extremely small.

When Bernstein protested that the mailing also said a winning number had to be returned and insisted that it wasn’t deceptive, Durbin cut her off. “This is a lie,” he said. “You’re deceiving people.”