25, 2001 VOLUME 8, NUMBER 52
Publishers Clearing House Must Cooperate With Iowa Investigation
Sweepstakes solicitations have become a major financial problem for the elderly in America. Thousands of individuals send millions of dollars to promoters of get-rich-quick schemes every year. Spouses and other family members are often powerless to prevent the fleecing of gullible individuals as they send in check after check.
Although it was once easy to distinguish between legitimate business solicitations and outright scams, the distinction becomes less clear with every new example. The most venerable of sweepstakes promoters, Publishers Clearing House, was once respected as a clever and entertaining marketing technique. In the past three years even Publishers Clearing House has been investigated or sued by more than half the states for its business practices.
By law no purchase can be required before entry into a sweepstakes drawing. The promoter is prohibited from suggesting that a purchase will increase the chance of winning. Mass mailings often obscure that fact, however, and vulnerable seniors purchase thousands of dollars of useless items in a vain attempt to increase their sweepstakes odds.
That is why Iowa’s Attorney General Thomas Miller began a review of Publishers Clearing House. He found, for example, that one 83-year-old woman bought a number of videotapes and CDs (though she had neither a VCR player nor a CD player) and subscribed to over 40 magazines. His office issued a subpoena to Publishers Clearing House, seeking the names and amounts of purchases for any Iowan who spent over $200 during a two-year period.
Publishers Clearing House objected, saying that the cost of responding would be high (estimates were that the cost would be about $23,000), that much of the information had already been provided, and that the information was a "trade secret" and not subject to disclosure. The Attorney General filed suit in the Iowa courts seeking to enforce his subpoena.
The Iowa Supreme Court upheld the subpoena. The Court noted that Publishers Clearing House had acknowledged earning at least $1.9 million from Iowa residents during the questioned period, and decided that a $23,000 expense was small in comparison to that revenue.
Publishers Clearing House had provided lists of those who had purchased more than $1,000 in goods and services. They had not indicated the actual amount spent—instead breaking the list into categories and lumping all those spending more than $2,500 into a single group. That, ruled the Court, was not enough; Publishers Clearing House must disclose the information requested by the Iowa Attorney General. State ex rel. Miller v. Publishers Clearing House, May 31, 2001.
The Iowa Supreme Court’s ruling does not mean Publishers Clearing House
must change its practices, but at least the Attorney General has the power
to investigate whether the company is intentionally taking advantage of
vulnerable seniors. Meanwhile investigations and lawsuits continue in a
number of other states.
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