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Those giddy sweepstakes winners shrieking with televised delight as the Prize Patrol pulls up to their front doors may be considerably more subdued in the wake of Tuesday’s court settlement by the Publishers Clearing House. While admitting no wrongdoing, the Port Washington, N.Y.-based company has agreed to pay back $18.48 million to 24 states, most of which will be returned to “high-activity” PCH customers — many of them elderly. The customers bought magazine subscriptions or made other purchases from the Clearing House totaling $2,500 or more in 1997, 1998 or 1999, under the mistaken impression that such purchases enhanced their chances of winning. The actual odds of winning the sweepstakes are no better than one in 50 million — a fact disclosed in small type in the entry rules. The company, which has used the sweepstakes since 1967 to become the nation’s largest multi-magazine subscription agency, was sued for unfair business practices and misleading advertising last January in San Diego Superior Court. The suit was part of a nationwide class action, filed after the states failed to reach a negotiated agreement. “PCH for years has targeted the elderly and others easily deceived, inundating them with deceptive mailers that are nothing more than sales pitches for magazines,” said California Attorney General Bill Lockyer on Tuesday. The company has agreed to stop luring customers with a direct “you are a winner” pitch, unless they have actually won, added Lockyer. Nor will PCH be able to request information such as where the person will be when the Prize Patrol comes to deliver the $10 million prize on Super Bowl Sunday. “Most of the remedial steps address what we alleged in the complaint,” said Illinois Attorney General spokesman Dan Anders. “It provides steps if someone wants to get off the mailing list or get a refund for money sent in or that a relative has paid.” PCH officials called it the nation’s first and most comprehensive agreement to address concerns voiced by consumer advocates. “We’ll pay $18 million over three years,” said Christopher Irving, director of consumer affairs for PCH. “States can spend it on consumer education or restitution.” In addition, the company will contact every customer who has purchased $1,000 or more in a year by letter, and forward the names of those who’ve spent $2,500 or more annually to state attorneys general for restitution claims, Irving said. Lockyer’s office estimates that upwards of 5,000 “high-activity” Californians will receive almost $5 million in refunds under the settlement. PCH earlier settled a smaller 1994 lawsuit with 14 states in which it agreed to refund $35,000 per state, said Irving. Founded in 1953, the company employs more than 800 people and operates as a limited partnership. In April, 48 states settled a similar consumer protection complaint against another sweepstakes giant, United States Purchasing Exchange of Northridge, Calif. The Sweepstakes Fact Sheet developed by USPE will be used by PCH. The settlement marks the latest in a series of aggressive consumer protection moves by state attorneys general, who have been working together by the dozens as they surge onto the formerly federal turf of business regulation. With 43 of those AGs popularly elected, expect to see more, not fewer, such cases in the future, say those who study the phenomenon. “It’s partly due to less enforcement on the federal level and partly political,” notes Franklin Gevurtz, who teaches business law at McGeorge School of Law. “AGs are often thinking of running for governor, and this gives them high visibility.” The states joining in the settlement are Alabama, Arkansas, California, Georgia, Hawaii, Idaho, Illinois, Louisiana, Mississippi, Montana, Nebraska, Nevada, New Hampshire, New Mexico, New York, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Utah, Virginia, Washington and Wyoming. Mark R. Madler of American Lawyer Media contributed to this report.

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