Publishers Clearing House Agrees to $18.5M Settlement for Violating FTC Act
Publishers Clearing House (PCH) agreed to a proposed court order requiring it to pay $18.5 million to consumers who “spent money and wasted their time” on the company’s sweepstakes, said an FTC news release that was embargoed prior to release of the Monday complaint (docket 2:23-cv-04735) in U.S. District Court for Eastern New York in Central Islip. The proposed order also requires the company to overhaul the sweepstakes entry and sales processes and to stop “surprise fees."
The FTC claims the publisher uses “dark patterns” through “manipulative phrasing and website design,” to mislead consumers about how to enter its sweepstakes and about the process required to win. PCH uses “deceptive and manipulative statements and user interface designs” to “deceive consumers into believing" they must order products before they can enter a sweepstakes or that ordering products increases their odds of winning, said the complaint.
The FTC also charges PCH added surprise shipping and handling fees to the costs of products, misrepresented that ordering is "risk-free," used deceptive emails as part of its marketing campaign and misrepresented its policies on selling users’ personal data to third parties before January 2019. PCH hides the total cost of orders until after the consumer has incurred a financial obligation, and its shipping and handling charges amount on average to 41% of the cost of the ordered merchandise, the FTC said. PCH generates revenue of about $1 billion in product sales annually, it said.
PCH targets older and lower-income consumers, said the complaint: The average age of its “core consumer” is 66, and 54% of its core consumers earn less than $50,000, said the complaint. The company uses the prospect of winning lucrative sweepstakes prizes “to lure consumers into repeatedly visiting its e-commerce website and buying products.”
Instead of entering consumers into the sweepstakes after they hit the call-to-action button on its homepage showing the “Official Entry Form,” PCH takes them to its e-commerce site where consumers have to click through several webpages of product ads, including magazine subscriptions, said the complaint. After clicking through several more ad-filled webpages, consumers are presented another call-to-action button where they can submit their sweepstakes entry, it said.
After customers enter the sweepstakes, PCH sends them emails falsely indicating they must complete another step to claim a prize number to be eligible to win, but links in the emails direct consumers instead to the e-commerce site with more ads rather than to a “true ‘final’ or additional step of some kind.” Dark patterns include “linking and conflating ‘ordering’ products' and ‘entering the sweepstakes' through the use of trick wording and visual interference,” said the complaint.
PCH also sent “millions of emails” referencing “fictitious forms and documents” that mimic the naming convention that the IRS uses on federal tax forms such as a W2-G (Certain Gambling Winnings Form) “to trick consumers into opening and reading the emails," it said.
PCH agreed to settle the FTC’s charges it violated the FTC Act and Controlling the Assault of Non-Solicited Pornography and Marketing Act. As part of the proposed court order, PCH will stop deceiving consumers that a purchase is required to enter its sweepstakes or boost their chances of winning; it will make clear disclosures that a purchase isn't required and clearly distinguish between entering and ordering; clearly disclose full prices of products for sale and all fees; stop deceptive emails; and destroy consumer data collected before 2019.
The proposed order also requires PCH to preserve records of “market, behavioral, or psychological research," plus user testing, including A/B or multivariate testing, focus groups, interviews, clickstream analysis, eye or mouse tracking studies or analyses of consumers’ impressions of ads, marketing, sweepstakes or products. Publishers Clearing House didn't comment.