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

For immediate release -- Tuesday, July 28, 1998.

Miller: "Sweepstakes Clearinghouse" Ordered to Pay Iowa $90,000 and Comply With State Consumer Protection Law

DES MOINES-- Attorney General Tom Miller announced today that a Dallas company doing business as "Sweepstakes Clearinghouse" must pay the State $90,000 for consumer education and litigation, make refunds to Iowa consumers, and follow important consumer protection requirements in Iowa's "prize promotion law."

Miller's office filed a court-approved consent agreement today in Polk County District Court in Des Moines with Allied Marketing Group, Inc., of Dallas, Texas, one of the nation's largest direct mail marketing companies. The action settled a lawsuit alleging that Allied's "Sweepstakes Clearinghouse" violated Iowa's prize promotion and consumer fraud laws in the company's direct mail contests, sweepstakes, and prize promotions.

The suit alleged, for example, that Sweepstakes Clearinghouse mailed a "Certificate of Award" to thousands of Iowa consumers with a so-called "credit-voucher" for hundreds of dollars off several listed items, such as a stereo system, "designer luggage" and diamond wristwatches. However, consumers still were required to send substantial payments for the items -- payments consumers complained were much higher than the value of the merchandise.

In other mailings, Miller's office alleged, Sweepstakes Clearinghouse falsely offered a "35mm camera" and a lifetime supply of Kodak film for $12.95, in a manner that led consumers to believe they actually were receiving a much more expensive camera as a prize.

"We alleged that Sweepstakes Clearinghouse promotions broke Iowa's consumer fraud law and our law on prize promotions," Miller said. "They falsely implied that consumers were big winners, that they had been specially selected, and that they must reply at once."

"We were concerned with a general pattern of mailings that proclaimed that Iowans were big winners of some kind but then required Iowans to make various payments to the company in order to collect on the so-called prizes," Miller said.

Sweepstakes Clearinghouse did not admit to any violations, but it agreed to pay the State $90,000 for consumer education and litigation expenses, to make any refunds requested by consumers, and to adhere to numerous restrictions in its promotions.

    Sweepstakes Clearinghouse was prohibited from numerous practices, including:
  • Offering any prize without a written prize notice containing the person's odds of winning the prize and other crucial information.
  • Requiring a person to purchase merchandise or make a payment as a condition of awarding a prize.
  • Falsely representing that a person is a "winner" or "finalist," has been specially selected, is in first place, or is otherwise among a limited group of persons with an enhanced likelihood of receiving a prize.
  • Selling, renting, or exchanging financial data regarding Iowans disclosed in connection with a prize promotion that does not comply with Iowa law.
If Sweepstakes Clearinghouse violates terms of the court-approved settlement, Iowa's Consumer Fraud Act provides for penalties up to $5,000 per day per violation, and contempt-of-court action could be initiated.

Miller emphasized two consumer tips when it comes to prize and sweepstakes solicitations:

"Number one: Always remember that, under Iowa law, no purchase is necessary to enter a sweepstakes," he said. "Number two: Always be suspicious if a promotion asks you to send any money in order to collect a so-called prize."

Miller said hundreds of Iowans had sent copies of Sweepstakes Clearinghouse mailings to his office, suggesting the promotions were "too good to be true" and questioning why they should have to make a payment in order to collect a prize.

"We're very pleased to note that many Iowans are aware of the tactics and alert to questionable solicitations offered by various sweepstakes companies," Miller said.

Miller said the Sweepstakes Clearinghouse case is part of an ongoing effort by the Consumer Protection Division to target misleading sweepstakes promotions.

NOTE:

The toll-free number for contacting Sweepstakes Clearinghouse is 800-443-1284.