Publishers Clearing House has agreed to an $18.5 million settlement with the Federal Trade Commission for deceiving consumers and using "dark patterns" to mislead them.
The FTC said the $18.5 million will be paid out to customers.
The FTC claims Publishers Clearing House failed to disclose the true price of goods, deceived customers about "no risk" purchases, used misleading email subject lines and had misleading statements in its privacy policy.
Publishers Clearing House denies any wrongdoing. The company says 98% of those who enter its sweepstakes online do not make a purchase.
"The majority of our millionaire winners never ordered with their winning entries. We really mean it when we say 'No Purchase is Necessary,'" said Christopher Irving, PCH’s vice president for consumer and legal affairs. "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."
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Amazon executives were reportedly aware of the problem, but took no action to fix it until the FTC investigation came to their attention.
Officials alleged that customers were misled into thinking a purchase would increase their chances of winning sweepstakes. Publishers Clearing House is also accused of adding surprise fees to the cost of products and using deceptive emails to customers.
The FTC said that once consumers completed their entry, they got another email leading them to believe they needed to take one more step to complete the entry.
"Today’s action requiring PCH to overhaul its user interface, compensate consumers for lost time, and stop surprise fees should send a clear message that manipulative design techniques are a no-go under our laws," said Samuel Levine, director of the FTC's Bureau of Consumer Protection. "This is our second dark pattern lawsuit over the last week. Firms that continue to deploy deceptive design techniques are on notice."
Publishers Clearing House is required to stop deceiving customers about purchases and sweepstakes, separate sweepstakes from sales, make clear disclosures, stop surprise fees and deceptive emails, destroy customer data and preserve records.
Publishers Clearing House was founded in 1953. The company says it has awarded $578 million in prizes since 1967.
