Sweepstakes Firm to Pay $30 Million in Restitution
A Northridge sweepstakes company, accused of misleading consumers in its contests, agreed Wednesday to pay more than $30 million in restitution, which California state officials called the largest such settlement in history.
United Sales Corp., which also does business as United States Purchasing Exchange, was investigated by 48 states and the District of Columbia after being accused of enticing consumers to buy products with the implication it would improve their chances of winning sweepstakes prizes.
Under the settlement with state attorneys general, the company admitted to no wrongdoing but agreed to establish a $30.4-million nationwide restitution fund for customers who spent more than $1,870 with the company from 1997 through 1999, State Atty. Gen. Bill Lockyer said Wednesday. The company also agreed to make “dramatic changes” to its consumer disclosure policy.
“USPE has taken an important lead by agreeing to include a clear and conspicuous sweepstakes fact sheet in all of its future sweepstakes mailings,” Lockyer said. “Through these disclosures, California consumers will not be lured into buying goods with the mistaken belief they are improving their chances of winning big prizes.”
More than 8,000 Californians may be eligible for a share of the settlement money, officials with Lockyer’s office said. Notifications will be mailed this fall, though the timing of the rebates is not yet known.
The disclosure statement--called “Sweepstakes Facts”--that the company agreed to include in sweepstakes mailings clearly spell out for consumers that: they have not yet won; buying products will not improve the odds of winning; and they do not have to buy products to enter the sweepstakes.
As part of the settlement, USPE agreed to pay the state of California more than $1.3 million for the cost of the investigation and to set aside $3.6 million for the cost of administering the restitution program, Lockyer said.
USPE also agreed to discontinue mailings to “high activity” customers who make more than 25 purchases or spend more than $935 in connection with sweepstakes in a year.
Separately, USPE agreed Wednesday to pay $20 million to settle a class-action suit brought by consumers two years ago. USPE officials said the settlements with the state attorneys general and the consumers were reached almost simultaneously.
Company spokesman Harvey Englander said in a statement that USPE has sold a variety of household items through its catalogs for more than 40 years. Englander said that the privately held company considers the settlement to be a model for handling allegations against sweepstakes companies, and that USPE will continue in business, although it recently went through a downsizing.
As with all sweepstakes programs, Englander said, people did not have to order items from USPE catalogs.
“There were some people who instead of purchasing gifts for themselves and or their friends or relatives, purchased items with the mistaken belief that it increased their chances of winning,” Englander said. “These inappropriate purchases took place despite USPE communications to the contrary.”
USPE, which sells household items such as clothing and appliances, has given away millions in prizes to customers throughout the United States, including a $3.3-million jackpot three weeks ago to a woman in Florida, Englander said. Within the last two years, the company has given away several multimillion-dollar jackpots and many between $5,000 and $100,000, he said.
Since 1967, Englander said, the company has awarded tens of thousands of sweepstakes prizes to customers throughout the United States. As with all sweepstakes programs, Englander said, participants did not have to order items from USPE catalogs to enter the contests.
The investigation of USPE is part of a larger investigation involving sweepstakes firms around the nation.
In January, 16 states, including California, filed complaints against sweepstakes giant Publishers Clearing House, claiming the company misled consumers into believing they had a better chance of winning contests by ordering magazines and other merchandise.
