A sweepstakes operator agreed to a permanent ban from the prize promotion business pursuant to a settlement with the Federal Trade Commission after being accused of operating an international scam.
Defendant Liam O. Moran and his companies took millions of dollars from consumers in the United States, Canada, France, Japan, and the United Kingdom by sending personalized mail that falsely stated the recipient had won a cash prize, typically more than $2 million, the agency said. Over a two-year period, the defendants sent more than 3.7 million letters to 156 countries.
To collect the money, the recipient had to pay a fee ranging from $20 to $30. By promising that the prize money was “guaranteed” if the fee was sent, the defendants created a sense of urgency by characterizing the prize as a limited-time offer.
The letters contained “dense, confusing language” that directly conflicted with the letters’ bold claims of major winnings, according to the FTC. In fact, the defendants merely provided consumers with a list of available sweepstakes and contests. Because of its placement and content, such language did not adequately communicate to consumers that they had not won a substantial prize, the agency alleged. Instead, the FTC said that those who sent the fee, primarily persons over the age of 65, got nothing of value in exchange for their payment.
Under the settlement, the defendants must properly dispense of all customer information and are banned from conducting prize promotions. They are also permanently prohibited from misrepresenting any goods or services and from selling or otherwise benefiting from consumers’ personal information. The settlement levies a judgment of more than $11 million (the amount of money that consumers lost through the scams, according to the FTC), which will be suspended once Moran turns over the proceeds from the sale of his home. However, the full judgment will become due immediately if the FTC finds that the defendants misrepresented their financial condition.
To read the complaint and the stipulated order in FTC v. Applied Marketing Sciences, LLC, click here.
Why it matters: The agency’s enforcement action reminds marketers that sweepstakes and prize promotions remain areas of focus for the FTC, and that egregious promotions could result in financial penalties and a permanent industry ban.