The settlement announced Tuesday, stemming from lawsuits and investigations launched by the states over the past two years, calls on Publishers Clearing House to change many of its practices and provides money to reimburse some consumers.
The money will go to the states to reimburse customers who spent at least $2,500 with Publishers Clearing House between 1997 and 1999.
"We believe that this agreement will help put an end to the horror stories of consumers, especially seniors, buying thousands of dollars in magazine subscriptions that they don't need and can't afford in the mistaken belief it will help them win a grand prize," said Attorney General Eliot Spitzer of New York, one of four states that lead the push for a settlement.
The settlement with the states imposes a number of conditions on Publishers Clearing House, which sells magazine subscriptions and collectibles by mail. Consumers have never been required to make such purchases to win one of the company's giveaways or to improve their chances of doing so.
But the pact with the state officials is designed to make that clearer. The company will now be prohibited from using "winner" proclamations, sending simulated checks and requesting information from consumers such as asking when they'll be home that would lead them to believe they had won a prize.
The mailings must also contain a conspicuous "Sweepstakes Fact Box" offering information about the odds of winning and the end-date of giveaways, and disclaimers telling consumers that buying something won't help them win.
The Port Washington-based company also agreed to maintain a list of people who do not want to receive its mailings and to contact its most active customers by mail and telephone to ensure they understand the promotions and are not under financial duress.
Executives for Publishers Clearing House embraced the agreement even as they defended past practices.
"We believe our mailings have always been clear to our many customers. Nevertheless prolonged litigation is very expensive," Publishers Clearing House senior vice president Bill Low said. "We needed to resolve this matter and we have, going the extra mile by agreeing to pay for consumer restitution and education and by adopting high standards that will make our advertising even clearer for the public."
Low said he expected the settlement will pave the way for similar agreements with other states that were not part of Tuesday's agreement.
But in Arkansas, a spokesman for Attorney General Mark Pryor said the settlement didn't go far enough. It wants Publishers Clearing House to make more changes in its marketing practices and wants refuds promised to people who spent less than $2,500 -- the threshold for the agreement among other states.
"We're not in a position to settle," Pryor spokesman Michael Tighe said. "We don't feel there was a lot of ground gained in changing the industry practice."
The states participating in the settlement are Alaska, Alabama, 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. The agreement also includes the District of Columbia.
Some consumers hailed the settlement, while expressing reservations about how much it will protect others.
"The most important thing is that they're stopping them from exploiting the elderly and others who can't tell its a scam," said Joe Questore of Eatontown, N.J.
Questore said one of his relatives, an 85-year-old Long Island man, had accumulated more than $20,000 in debt trying to pay for items from Publishers Clearing House and other marketers. The debt grew so large that the retiree was using most of his pension and social security checks to cover the bills and was forced to get a job as a janitor.