Following an $8-million settlement regarding its use of direct-mail sweepstakes promotions, Reader's Digest chairman Tom O. Ryder said that the company's U.S. book and home entertainment business could see short-term declines in response rates as the division adjusts to new standards that were part of the agreement. Ryder added that the declines could "modestly affect our earnings for the balance of this fiscal year and next." According to Ryder, the RD book and home entertainment group began to make promotional changes earlier this year in anticipation of the settlement.
Under the agreement reached with attorneys general from 32 states plus Washington, D.C., RD will pay $6 million to 7,500 customers who spent more than $2,500 annually in 1998, 1999 and 2000 on magazine subscriptions, books and videos. The company will also pay about $2 million in legal fees. In addition, RD will include a fact sheet in its promotional packages that states that buying a product does not increase a customer's chance of winning a prize.
