Welcome to the Department of Justice, Iowa Attorney General Tom Miller

For immediate release -- Wednesday, May 17, 2000.
Contact Bob Brammer - 515-281-6699

American Family Publishers to Change Sweepstakes Tactics

Iowa Settlement prohibits even implied claims that a person has won a prize or must make a purchase in order to win.

Iowa Attorney General Tom Miller said Thursday that American Family Publishers - the sweepstakes company that in the past has featured Ed McMahon and Dick Clark as spokespersons - has signed a stringent agreement to change its sweepstakes promotion tactics. The company also will pay substantial sums for consumer reimbursements.

"Our concern has been that major sweepstakes mislead and deceive older Iowans into believing that they are big winners and that they must make a purchase to win," Miller said. "Today's action should dramatically change the sweepstakes promotions of American Family Publishers."

Miller said the settlement provides several key elements:

  • American Family is barred from using claims - direct or implied - that a person has won a prize, is among a select group with a higher chance to win a prize, or is close to winning a prize. American Family may not use the word "finalist" unless the recipient is truly a finalist.

  • American Family is barred from representations - direct or implied - that a purchase is necessary or is helpful for a person to win a prize. "By law, sweepstakes may not require a purchase, but many, many people do not understand this, and sweepstakes mailings often have confused or deceived people," Miller said.

  • Any qualifying language in a solicitation - such as you COULD or you MAY be a winner - must not be buried and must be made as prominently as the offer it qualifies. "We have long felt that the overall impression of many sweepstakes promotions that a person has won overwhelms any fine print disclaimers that it may not be true," Miller said.

  • American Family has agreed to entry of a formal court consent judgment if the company violates the settlement agreement. "This gives the company very strong incentive to adhere to the agreement and change its practices and its solicitations."

  • American Family will make payments, subject to a bankruptcy court's approval, of at least $250,000 for restitution to Iowa consumers.

Miller said his office has cooperated with the Connecticut Attorney General's Office in forging the settlement with American Family, and that the settlement built on earlier agreements American Family struck with four other states, Florida, West Virginia, Indiana, and South Carolina.

"I am most pleased that we have been able to include a ban on even implied claims that are not true, such as that a person already is a winner," Miller said. "We know from long experience that especially older Iowans sometimes are deceived by clever wording, huge headlines or fancy certificates that make it appear that they are winners when they really are not. Now even implied claims like that will be prohibited."

Miller also said the formal "Consent Judgment" attached to the agreement - which Miller could take to Court if there is a violation by American Family - is a big step forward. "This will really strengthen our hand in the future and thus be a huge incentive for American Family to live up to this agreement," he said.

The settlement agreement is between the State and American Family Enterprises, TAF Holdings, Inc., and AFP Associates, L.L.C. American Family Enterprises is a partnership of TAF Holding, Inc. and AFP Associates, L.L.C., and has its executive offices in Jersey City, New Jersey.

"This is a landmark settlement," Miller said. "For the first time, a company has agreed that claims must not be misleading, whether they are made expressly or are implied by other language or the overall message of the mailing. Companies have gotten around settlements with other states in the past because they could easily change the language of a solicitation letter to avoid a banned claim, but still mislead consumers. We believe this settlement ends that practice for American Family Publishers, once and for all."

Miller said the Consumer Protection Division investigation started over two years ago and resulted in a lawsuit in Iowa State District Court against American Family to require the company to comply with demands for documents that the company had refused to turn over to the State. "We opened this investigation with the goal of getting fundamental change in the sweepstakes industry," Miller said. "This settlement represents that fundamental change, and Iowa consumers will be much better off for it."

Miller said that the problem with past American Family mailings was that they included messages which caused recipients to believe that a purchase was necessary in order to enter or win the sweepstakes or to enhance chances of winning, that the recipient was in fact the winner, and that the prize will be forfeited if the recipient didn't immediately respond.

"No longer will American Family get away with mailings telling consumers, 'It's down to a two-person race between you and one other person,' a claim that was patently untrue," Miller said. "The company claimed to have disclosed in the fine print that what it meant was two people in one state had the same sweepstakes entry number, not that the specific number was the winner. Many consumers, especially older citizens, have difficulty reading or understanding these fine print disclaimers."

Miller said the company also engaged in deceptive invoicing practices, such as using an accelerated invoicing system that resulted in duplicate payments by many consumers for single orders, automatic extensions of subscriptions without notice to consumers, misleading debt collection practices, rental of mailing lists of sweepstakes entrants without notice to consumers and improper use by the company of spokespersons.

Miller said the Iowa settlement will be related to American Family's chapter 11 bankruptcy in a New Jersey federal court and a private class action settlement that also has been consolidated in the bankruptcy court.

Miller encouraged Iowans who have lost money to sweepstakes, or who know older consumers who have lost money, to contact the Consumer Protection Division by phone at: 515-281-5926, by fax at: 515-281-6771, by e-mail at: consumer@max.state.ia.us, or by mail at: Consumer Protection Division, Hoover Building, Des Moines, IA 50319.

- 30 -