Cengage Advantage Books: Business Law 9th Edition by Arnold Goldman ,William Sigismond

Exercise 21

Think of companies using marketing schemes that "get to you." For example, to promote the sale of magazines and other products, one company sent out a packet of information to specific individuals with a letter giving recipients the impression that they were one of perhaps three in their area to be eligible to win a substantial sum of money. All they needed to do was answer the correspondence and say they were interested in the money if it were offered to them. One of the three people had already been declared a winner! The letter also stated that to claim the winnings, the person needed to return an envelope containing answers to questions relating to the winnings, such as, "Would you like the money in a lump sum or in installments?" This statement alone would get people excited. A request asking the person to subscribe to various magazines or buy certain products was also a part of the packet of information provided by the company. There were all kinds of magazines and other products to choose from for purchase.
A packet with these letters was sent frequently over an extended period of time. Each letter contained a new offer to win thousands of dollars to be paid on a certain date, and it always stated that the recipients were one of the finalists. These letters kept everybody's hopes up. The date arrived, but no winners were announced. The company kept advancing the date to announce the winners, and these letters kept asking recipients to buy more products and/or magazines. There was always a statement included with the letter that said "you don't need to make a purchase to win." (This statement keeps the marketing company within the law so their scheme does not appear to be gambling.) However, many people feel compelled to buy the company's products as a way to possibly win a prize. The company does eventually announce a winner (or winners), but by the time the announcement comes, people may have spent a lot of money on magazines and newspapers and most likely were not winners.
Questions
1. Is this company's marketing scheme unethical?
2. Is the scheme illegal?
3. Is any sort of contract with the company involved?
4. Suppose that you got involved with a company that conducted this scheme, and after expending much time and money, but before the winners were announced, you decided to drop out. Would you simply forget about it, or would you take some kind of action, such as reporting your case to the Federal Trade Commission as an unfair business practice or to the attorney general's office in your state requesting legal action against the company?