Reader’s Digest has agreed to pay $196,000 to settle a dispute with the state of Connecticut over deceptive marketing of its sweepstakes. The popular magazine, found in supermarket aisles and dental offices everywhere, promoted its sweepstakes by claiming that purchasing more company products increased an entrant’s chances of winning. The actual odds of winning the sweepstakes were not affected by such purchases (unless one considers the “winner” to be Reader’s Digest, which derives about 75% of its revenue not from magazine sales, but from these ancilliary products).

Connecticut’s Attorney General sued Reader’s Digest on behalf of consumers, and focused on seeking restitution for “high activity” consumers – those who spent more than $2,500 a year on Reader’s Digest products between 1997 and 2000. The settlement money is intended to go right back into the hands of the consumers that were deceived, through a claims administration process.

In addition to the settlement, the Attorney General secured an injunction preventing Reader’s Digest from engaging in deceptive marketing practices for its sweepstakes in the future. From now on, Reader’s Digest agrees to disclose the odds of winning, set forth clear entry deadlines, inform consumers that purchases do not increase the likelihood of winning, and clearly state in all solicitations that consumers have not yet won a prize.

Reader’s Digest resolved similar claims with 33 other states in 2001 in a multi-state settlement.

Consumers who receive a prize notification and a check as winnings from the North American Prize Pool are the latest victims in a new sweepstakes scam: cash the check and say goodbye to your savings.

According to the Seattle Police Department, the “mark” is sent a letter and a check (drawn on a real bank). She is told that she has won $300,000.00 and in order to verify that the mark is really the winner, she is asked to deposit the check in her account and then send back a check for the same amount to cover the taxes. The victim’s check is real; the sweepstakes check is counterfeit. When the sweepstakes check bounces, the victim’s bank charges the victim for the $4,000.00.

Sweepstakes Pointer: No legitimate sweepstakes will ever charge an entrant to collect winnings. In addition, a verification process usually involves a written declaration. Finally, consumers should be suspect of any sweepstakes in which they do not remember entering.

Last month, the 9th Circuit Court of Appeals ruled that non-commercial use of a party’s trademark as a domain name may not constitute trademark infringement.

The case involved the use of the Bosley Medical Institute’s BOSLEY trademark, which it uses for its hair replacement system. Bosley Medical Institute’s brush with defendant Michael Kremer started when the former disgruntled employee registered the domain name www.bosleymedical.com and then proceeded to write some unfavorable — shall we say hairy — things about his former employer. Bosley Medical brought suit, allegiing trademark infringement of its registered mark.

After combing through the facts, the 9th Circuit held that Kremer’s use of the trademark was non-commercial speech, that no consumer would be confused by his use of the mark, and that the Lanham Act cannot be used as a shield against free speech or criticism.

It’s clear that Kremer’s web site was a bald-faced attempt to divert traffic from the Bosley Medical program. Still, without proof that the site was confusing consumers, or that Kremer was selling hair pieces himself, Bosley is stuck with the wigged-out web site.