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Sweepstakes company agrees to refund over $30 million to consumers in settlement with state attorneys general and DC Corporation Counsel

Wednesday, April 5, 2000

Sweepstakes company agrees to refund over $30 million to consumers in settlement with state attorneys general and DC Corporation Counsel

Corporation Counsel Robert R. Rigsby announced today that his office and 48 state attorneys general have obtained a settlement that requires one of the country's largest sweepstakes companies to make dramatic changes to its promotional mailings and to refund more than $30 million to consumers. In addition to the District of Columbia, the settlement includes Maryland and Virginia.

The Attorneys General of Missouri, Arizona, California, Indiana, and Washington and the Corporation Counsel of the District of Columbia led the multi-state effort to reach the settlement. "Never before has the District played a leadership role in negotiating a multi-state consumer protection settlement on behalf of most of the states," Rigsby said.

The settlement was negotiated with United States Sales Corp., of Northridge, California, which does business as United States Purchasing Exchange and USPE. Each year, the company mails out tens of millions of sweepstakes entry forms, accompanied by catalogs for household and personal products.

According to Rigsby, the company's mailings have misled many consumers into believing that they are close to winning a sweepstakes and that they can increase their chances of winning by placing a catalog order. He said, "There are consumers who spent thousands of dollars a year on products from these catalogs, not because they wanted all that merchandise but because they believed that making repeat purchases would increase their chances of winning. Many of our senior citizens seem to be particularly vulnerable to these sales tactics."

United States Sales Corp. has agreed not to represent in the future that a customer is even a possible winner unless the company also discloses, in print of equal size and as part of the same representation, the conditions that must be satisfied in order for the customer to be determined to be the winner. The company has also agreed to include in all sweepstakes mailings a large-type insert called "Sweepstakes Facts," which will disclose the odds of winning and the value of each prize offered. A copy of the insert is attached.

The settlement agreement provides that the company will be paying a total of $30.4 million into a special fund for consumers; this sum will be used to pay partial refunds to consumers who spent at least $1,870.00 in either 1997, 1998, or 1999. District of Columbia consumers are expected to receive more than $60,000 in partial refunds. In addition, the District of Columbia government will be receiving $50,000 as reimbursement for its attorneys fees and investigative costs as one of the leaders of the multi-state effort.

The company has also agreed to stop sending sweepstakes mailings to any customer who has spent $2,500 or more in response to sweepstakes mailings during the last twelve months. In the future, the company will stop sending sweepstakes mailings to customers once their spending in response to sweepstakes mailings exceeds $935 in a twelve-month period.

Copies of the settlement agreement and samples of USPE mailings sent to consumers in the District of Columbia during 1999 are available from the Office of the Corporation Counsel.

Media Contact: Leigh A. Slaughter, Special Deputy Corporation Counsel, (202) 724-5198.