Time to Refund $4.9 Million in Sweepstakes Case

Time Inc. on Thursday said it will refund more than $4.9 million to about 6,000 customers--including 900 in California--who may have been deceived into believing that their chances of winning a company-sponsored sweepstakes would be improved by purchasing magazine subscriptions and other products.

Time, a unit of New York-based Time Warner Inc., becomes the third sweepstakes firm to settle with state regulators in the past five months.

On Tuesday, Publishers Clearing House, one of the industry’s largest players, agreed to refund $16 million to customers in 24 states. In April, Northridge-based U.S. Sales Corp. agreed to pay a record-setting $30 million to settle investigations by attorneys general in 48 states and the District of Columbia.

Like Publishers Clearing House and U.S. Sales, Time also agreed to abide by new business practices and disclosure rules aimed at protecting consumers, including adding a sweepstakes fact box to mailers. The box explains that consumers have not yet won; are not required to purchase any product to enter the sweepstakes; and that buying products will not improve the chances of winning.

Officials at Time denied any wrongdoing and defended its marketing practices.

“Time has always striven to market products in a clear and straight-forward manner, including the sweepstakes program,” said company spokesman Peter Costiglio.

Thursday’s settlement covers 47 states and the District of Columbia. Refunds will be offered to consumers who spent more than $500 in any of the past three years on Time Inc. products in connection with an entry in the company’s “Guaranteed & Bonded” sweepstakes.

State regulators began investigating sweepstakes companies in 1998, after reports surfaced that consumers were spending thousands of dollars on unneeded merchandise in the false belief that it would improve the odds of winning multimillion-dollar prizes. Some elderly consumers, misled by sweepstakes mailings, traveled to the companies’ headquarters under the impression they’d won lucrative prizes.

“This is a really sleazy way to promote a magazine,” said Ira Zimmerman, 59, a retired engineer who says he received several letters from Time Inc. claiming he’d won huge cash prizes. One was for $1.6 million and another for $833,000.

Zimmerman said he wasn’t fooled, but the letters bothered him so much that he complained to state regulators.

Time also faces some class-action lawsuits filed earlier this year over its marketing practices. A company spokesman said the suits have no merit.