By Vicki Needham - 04/15/14 06:11 PM EDT
A Senate committee is examining whether a well-known sweepstakes company is continuing to deceive consumers by making them think that they need to make purchases to improve their odds of winning large cash prizes.
The Senate Special Committee on Aging is investigating whether Publishers Clearing House is misleading consumers, especially seniors, by giving them the impression they have won or are close to winning a prize and that buying products or subscriptions helps their chances, a committee report released Tuesday shows.
Panel Chairman Bill Nelson (D-Fla.) and ranking member Susan Collins (R-Maine) said they found numerous examples of solicitations that appear to "push the limits" of federal law and settlement agreements PCH has reached with dozens of state attorneys general over the last two decades.
"I'm all for folks winning prizes but it concerns me when seniors still report they’re being misled by Publishers Clearing House," Nelson said.
"If people are concluding that they have to buy something to enter or win the sweepstakes, then we need to make sure that gets corrected."
The committee began its investigation during the summer of 2013 after receiving reports from seniors who had made frequent purchases from PCH.
For example, a Pennsylvania man was so convinced he was about to win a big prize from PCH that he called his son to ask him if he could be on hand for the giveaway.
The son then discovered his father had spent more than $2,600 on PCH merchandise over a two-year period in hopes it would improve his chances of winning.
The scenario may sound familiar — it is similar to the plot in the Oscar-nominated movie Nebraska where Bruce Dern asks his son to drive him to pick up his $1 million prize, which turns out to be a scam to trick people into buying magazine subscriptions.
“Our laws should prevent unscrupulous solicitors from taking unfair advantage of our seniors," Collins said.
In 1999, Collins held a series of hearings that revealed PCH's deceptive direct marketing campaigns and led to a law designed to end them and create new standards by requiring mailings to include the odds of winning a prize, the rules of the contest and a statement that no purchase is necessary.
"This law has been very successful in protecting consumers against deceptive mailing practices," Collins said.
"Given the significant shift in recent years to electronic communications, however, it may be time to consider updating this legislation to cover e-mail and online communications"
PCH entered into consent agreements with state attorneys general in 1994, 2000, 2001 and 2010.
In 2000, PCH settled with 23 states and the District of Columbia and although the company admitted no wrongdoing it agreed to pay more $18 million, including $15.9 million in restitution to customers.
In 2001, 26 states settled with PCH over essentially the same allegations, which led the company to pay another $34 million in restitution and fines and to issue an apology.
Four years ago, PCH paid 33 states and the District of Columbia $3.5 million after the company was accused of violating its earlier agreements.
The report detailed examples of PCH solicitations that committee staff identified as potentially misleading to consumers.
• Solicitations that incorporated maps of the recipient’s neighborhood, along with a statement that a prize is “approved for delivery.”
• Letters accompanied by “Stay Rich Tips for New Winners” inserts which tell recipients to “buy and spend smart” and to “contact a reputable accountant or financial advisor.”
• Envelopes used for mailing in sweepstakes entries that include detachable notices that read: “OOPS! Did you forget to place an order?”
• Various warnings that appear when a consumer is entering a sweepstakes online, including “Order History Review: No Order Ever Placed” and “Wait! We See That You Are Not Placing an Order!”
In addition, a staff review of consumer complaints against PCH confirmed that many consumers believe the company is still using many of the exact messages previous settlements sought to eliminate.