Last week, the FTC filed a lawsuit against Terry Somenzi and International Advisory Services, Inc., among other defendants, for an allegedly fake prize scheme in federal court. According to the FTC’s complaint, the defendants engaged in deceptive acts and practices by targeting thousands of elderly consumers, announcing in a personalized letter that the recipient had won a substantial cash prize of nearly $1 million promising that a “confirmed” or “guaranteed” prize was “awaiting disbursement” to the winner. The cash prize notifications then instructed the winners to pay a $25 fee to collect their prizes, but no prizes were awarded. The FTC is seeking an injunction against Terry Somenzi and the defendants, as well as restitution and refunds for affected consumers.

TAKEAWAY: Companies that wish to advertise sweepstakes and contests should avoid messages which suggest or imply that someone has won a prize, unless they are verified as a winner. Additionally, companies should review post-consideration sweepstakes and contest laws when determining whether they wish to impose a fee on a winner in exchange for accepting a prize.