$9.5 Million Penalty, Lifetime Ban for Deceptive Sweepstakes Promotion

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February 24, 2015

sweepstakesEarlier this month, the Federal Trade Commission (“FTC” or “Commission”) entered into a settlement agreement with Ms. Crystal Ewing requiring that she pay $9.5 million for the marketing and operation of deceptive sweepstakes promotions.  Additionally, Ewing has agreed to a permanent ban from all direct mail marketing in the future.

Not Her First Sweepstakes Rodeo

Last week was not Ewing’s first run-in with the Commission.  In 2007, Ewing reached a separate agreement to pay the FTC $1.4 million following accusations that her promotions violated federal sweepstakes laws.

According to the facts at issue, Ewing’s marketing letters led many consumers to believe that they had to pay a processing fee in exchange for a substantial cash prize, but none of those who sent the fee received the promised money, the Commission’s complaint alleged.  Although she neither admitted nor denied any of the FTC’s allegations, the 2007 agreement stipulated that Ewing was forbidden from any future involvement in prize promotions.

Fool Me Once, Shame on You . . .

Despite Ewing’s promise to steer clear of promotional contests, she apparently had other plans.  From 2008 to 2014, Ewing continued to distribute direct mail ads, which required consumers to pay processing fees of $10 to $15 to receive their purported sweepstakes prizes.  Ewing’s illegal sweepstakes promotions brought in over $9.5 million, but no more than $30,150 was ever paid to entrants.

The FTC requested that a Nevada federal court hold Ewing in contempt for violating the 2007 settlement.  This time, the Commission ultimately provided Ewing with a new, less favorable agreement.  In the latest settlement, Ewing openly admits that her advertisements “contained material misrepresentations that were likely to mislead consumers.”  Pursuant to the terms of the agreement, Ewing must return all of the money that she collected from consumers and will now be banned for life from the broader category of all direct mail marketing.

In addition, Ewing must provide all of her sweepstakes customer information to the FTC.  The Commission plans to redress “duped consumers” with the settlement funds, similar to the terms of an FTC contempt settlement entered into last February.

Don’t Double-Cross the FTC

As evidenced by the terms of this settlement, the FTC takes a strong stance against marketing companies and professionals that do not comply with sweepstakes regulations.  As such, it is critical that sweepstakes promoters and marketers remain abreast of ever-evolving regulations in the promotional contest and marketing space, or risk bearing substantial (and perhaps even personal) liability.

If you need assistance with setting up a sweepstakes, contest or other promotion, or if you have been served with legal process relating to your marketing practices, please e-mail us at info@kleinmoynihan.com or call us at (212) 246-0900.

The material contained herein is provided for informational purposes only and is not legal advice, nor is it a substitute for obtaining legal advice from an attorney.  Each situation is unique, and you should not act or rely on any information contained herein without seeking the advice of an experienced attorney.

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