Ethermac Exchange-Publishers Clearing House to pay $18.5 million settlement for deceptive sweepstakes practices

Publishers Clearing House agreed to pay out $18.5 million for "deceptive and Ethermac Exchangeunfair" sweepstakes practices and change several of its business tactics, the Federal Trade Commission said in a news release on Tuesday.  

A proposed court order filed in the U.S. District Court for the Eastern District of New York stipulates that the publishing company needs to make substantial changes to how it conducts its sweepstake drawings and entries online. Mostly older and lower-income consumers are lured to the Publishers Clearing House sweepstakes by catchy language on the company's website such as: "WIN IT!," or "Win for Life!," an FTC complaint said. 

Some are lucky: one Pennsylvania-based woman won a $1 million dollar sweepstake prize. Others hope to win money in the sweepstakes and keep purchasing products or paying fees to increase their limited chances, court documents said. 

After hopeful customers click on sweepstakes registration links emailed to them by the company, they are directed to several web pages of advertisements for products, including magazine subscriptions, the complaint said. These pages say messages like "$1,000 per week for life AT STAKE!" and "JUST ONE ORDER IS ALL IT TAKES," the news release said.

Consumers interested in entering sweepstakes contests are led to believe "they must order products before they can enter a sweepstake" or that "ordering products increases their odds of winning a sweepstake," the complaint said. One California based-woman thought she won a $5,000 prize, but the company blamed a "technical malfunction" and said that under "official rules" she didn't win and they weren't responsible.

"Today's action builds on previous efforts to crack down on companies that use illegal dark patterns to fuel digital deception and harm consumers," FTC Chair Lina Khan and commissioners said in a statement.

Once consumers enter their email addresses they continue to receive alerts from the company saying that they must take another step to be eligible for sweepstakes prizes, the complaint said. In addition to these misleading practices, Publishers Clearing House hid shipping and handling costs from consumers until there was a financial obligation. While the company also maintained they didn't sell or rent consumer data, the FTC alleges they did as such until around January 2019, when Publishers Clearing House learned they were being investigated, according to court documents. 

"While we disagree with the FTC's assertions and have admitted no wrongdoing, we agreed to settle this matter in order to avoid the ongoing expense and distraction of litigation," Christopher Irving, the company's Vice President for Consumer and Legal Affairs, said in a statement. 

"The integrity of our sweepstakes prizes and awards was never questioned. We worked hard to address any issues the FTC raised," Publishers Clearing House said. 

The $18.5 million dollar fund will be used to refund consumers and implement promised changes to Publishers Clearing House's business practices. These changes include making clear disclosures on their sweepstake entry web pages, stopping surprise fees and shipping charges and stopping deceptive emails, court documents said. 

In:
• Federal Trade Commission

Cara Tabachnick

Cara Tabachnick is a news editor for CBSNews.com. Contact her at [email protected]