SACRAMENTO, Calif. — A national sweepstakes company has agreed to pay more than $6 million to settle allegations that its promotions misled customers in Utah, 31 other states and the District of Columbia, California officials said Thursday.
The Reader's Digest Association Inc. will pay $4 million to about 7,500 "high-activity customers" who spent more than $2,500 annually in 1998, 1999 or 2000 on magazine subscriptions, books and videotapes, said state Attorney General Bill Lockyer.
The company also agreed to add a conspicuous fact sheet to its contest materials that lists the odds of winning a prize as well as a statement that buying products from Reader's Digest won't increase those odds.
Reader's Digest will pay a total of $2 million in attorneys' fees and investigation costs.
Phone messages left at the Reader's Digest media office were not immediately returned.
The company sends out millions of sweepstakes entries each year, most of which offer subscriptions to Reader's Digest and other magazines, books, audio tapes and video tapes, Lockyer said.
New Jersey Attorney General John J. Farmer Jr., said the deal will help sweepstakes contestants understand that "you don't have to pay to play."
Additionally, the company will send special letters to those who spend more than $1,000 in six months telling them they are not required to make purchases in order to have a chance in the sweepstakes.
Under the agreement, Reader's Digest cannot say a consumer is about to be a winner or misrepresent the odds of winning, and cannot say the mailings were sent by special courier or special class if they weren't.
A similar settlement was reached in August with Time Inc. The company agreed to pay $8.2 million to customers in 48 states and the District of Columbia and to include statements about sweepstakes odds in their mailings.