Continuous Service Served
Lawmakers scrutinize publisher partnerships. Should marketers drop subscriptions?
Magazine publishers are coming under the gun again for promotion-related subscription schemes, and this time they could bring other marketers down with them.
A class-action suit in Florida charges Time Inc. and Ticketmaster with automatically billing Ticketmaster customers for Time subscriptions. At the same time, the Federal Trade Commission is reviewing its 1994 Telemarketing Sales Rule, and the Florida attorney general is investigating Time’s “continuous service” practices, in which a marketing partner – a direct-mail retailer, or a phone-order service like Ticketmaster – offers a free trial subscription when consumers make credit-card purchases. The “trial” then automatically converts to a paid subscription and is billed to the card used for the initial purchase if the consumer doesn’t cancel.
The class-action suit, filed Dec. 11 by James, Hoyer, Newcomer & Smiljanich in Tampa, alleges that Ticketmaster billed a woman for a subscription to Entertainment Weekly, and charged her credit card $372.17 for concert T-shirts and pins offered when she bought concert tickets. A letter on dual Time/Ticketmaster letterhead said she’d get eight free issues before her card would be charged $24.95 to continue the subscription if she didn’t cancel. (She did.) The suit charges that Ticketmaster and Time shared credit-card information without cardholder consent, a criminal misdemeanor in Florida.
No other plaintiffs have joined the suit, and no court date is set. At press time, Time had not filed a formal response. “Our subscription offer is very clear to consumers and complies with all laws, rules, and regulations,” says Time Inc. spokesperson Peter Costiglio.
Separately, Florida’s AG opened an investigation against Time after receiving numerous complaints about continuous-service offers and charges without consent. “We’re concerned about disclosures to consumers in these transactions, and what burden it places on consumers once they accept a trial offer,” says assistant attorney general Victoria Butler. The AG sometimes investigates a publisher’s partner, but usually focuses on the publisher, Butler says.
Meanwhile, the FTC continues the federally mandated review of the Telemarketing Sales Rule begun last year. A July public forum included discussion of “pre-acquired account telemarketing,” the practice of piggybacking an offer on a different company’s sale, automatically using the same method of payment. The National Association of Attorneys General (NAAG) suggests the FTC change the rule to require telemarketers to get written consent before charging a pre-acquired account. Since most telemarketing calls require consumer consent (via contract, check, or credit card number), pre-acquired account calls “should not be able to circumvent these established mechanisms for consumers to signal consent,” NAAG says.
Promotional partnerships are increasingly important to publishers. For Time, partnerships garner nearly 20 percent of new business subscriptions for its New York City-based titles – about 600,000 to 750,000 each year, per trade publication Circulation Management. Last year, Time set up a partnership marketing division called Time Direct Ventures to tap catalogers and marketers with heavy in-bound phone volume like Home Shopping Network. Such partnerships could be threatened if legal challenges heat up.
Procter & Gamble’s Iams Co., Dayton, OH, and rival Nutro Products, City of Industry, CA, are awaiting a court date for simultaneous suits.
Nutro sued P&G in December for false advertising and trade libel at Iams, claiming that feeding guidelines on the brand’s packages and Web site cause dogs to lose weight at a dangerous rate.
Iams filed suit against Nutro first on Nov. 30, after a Nov. 9 meeting in which Nutro president-ceo Jerry Sicherman asked that Iams change feeding instructions or face action. The P&G brand filed in U.S. District Court in Dayton, OH, to “protect our long-standing reputation and set the record straight after officials from Nutro contacted us to deliver non-negotiable demands and threaten litigation against us,” says Iams spokesperson Bryan Brown. “We value our reputation as a world leader in dog and cat nutrition.”
Nutro’s suit, filed in U.S. District Court in Los Angeles, says Iams misleads consumers by recommending smaller servings of Iams Chunks than what Nutro recommends for its comparable products, then extrapolating smaller servings to cost savings.
Last May, Iams had a panel of vets, breeders, research nutritionists, and pet specialty store owners certify its product quality to reassure consumers as parent P&G expanded the newly acquired brand’s distribution beyond pet stores. Nutro’s suit cites independent kennel tests, commissioned in April ’99, that show dogs lose weight too quickly under Iams’ instructions.
