MAGAZINE subscription agent Publishers Services Exchange (PSE) is being watched closely by publishers, many trying to prevent the firm from soliciting customers and prospects for magazine subscriptions and renewals without authorization.
The firm and its owner, Dennis Simpson, who owns or operates a number of companies, has been sued by both the states of Oregon and Washington over its alleged magazine subscription marketing practices. Oregon is preparing for trial.
PSE operates as both a direct agent and a subscription agent. Like many agents, it rents or purchases magazine subscriber files and then solicits magazine customers and prospects, said Alan Herson, legal counsel for Simpson and PSE. The firm, which has operated under a number of different names over the years, mails 35 million direct solicitations each year, he said.
Oregon Attorney General Hardy Myers filed that state’s lawsuit last September, accusing Simpson and his firms — I.C. Marketing, American Consumer Publishing (ACP) and PSE — of using direct mail solicitations to mislead consumers into renewing or purchasing magazine subscriptions. PSE and ACP are in White City, OR.
Herson said the defendants deny any wrongdoing. While some publishers have complained about its marketing tactics, others praise the firm’s work, he said.
The lawsuit was filed in Marion County Circuit Court in Salem, OR. Officials at the attorney general’s office declined to comment citing preparation for the trial, spokesperson Jan Margosian said.
According to Oregon’s complaint, the defendants state that sub rates are expected to go up soon and customers should lock in their current rate. Other solicitations imply the notice came directly from the publisher.
Oregon claimed renewal rates are sometimes more costly than those of the magazine’s publisher. In some cases, consumers do not receive the subscriptions they have paid for. The state said the conduct occurred from 1999 and continues this year.
Besides other penalties, the state is asking for civil penalties of $25,000 per violation, that the defendants be barred from conducting business in Oregon, and that affected consumers receive full restitution.
Some publishers have begun investigations into PSE’s practices and have contacted their authorized agents requesting that any orders from PSE and other companies tied to Simpson be denied.
The impact of the scheme on publishers has been twofold: Loss of revenue and goodwill.
“Your subscriber is getting pummeled over the head with someone you have no business contact with,” said Alan Zamchick, list director at Hachette Filipacchi Media U.S. Inc. “That’s a public relations nightmare.”
Many publishers have tried to alert subscribers to the alleged scheme via notices in their magazines and on their Web sites.
“It’s a huge problem,” said Fran Kane, circulation director for Archaeology Magazine.
A notice at the Archaeology Magazine site reads: “Neither United Publishers Network nor Publishers Services Exchange is an authorized representative or agent of Archaeology Magazine or the Archaeological Institute of America. Publishers Services Exchange is selling a three-year subscription at a price higher than the price Archaeology offers its subscribers.”
According to Archaeology’s Kane, the magazine received its first complaints about PSE around January 2001. By spring it printed alerts in its magazine and posted the notices on its Web site. It then requested that its fulfillment house block all requests from PSE and to forward all orders received from PSE to Archaeology.
By the wintertime, customers began receiving notices from PSE saying it could not fulfill orders but would substitute another title in the same magazine category, Kane said.
Lawyers for Archaeology sent a cease and desist order to PSE and received a letter saying, “If you authorize one agent, you have to authorize them all,” she said.
The Magazine Publishers Association is developing a list security task force to deal with PSE, sources said. The MPA declined to comment specifically, but did release the following statement.
“Magazine Publishers Association will continue to work with its members to address the questionable marketing tactics of some companies that may tarnish the good brand names of our members.”
In other legal action, the state of Washington received a judgment in 1999 against Dennis Simpson and several companies. The defendants — accused of charges similar to those in the Oregon case — were required to pay civil penalties and restitution to consumers, and were barred from operating as described in the judgment in Washington, the documents said.
In that case, subs had been solicited for Business Week, Newsweek, Cars and Parts, Boating, World, Fortune, the Economist, Time and others, court documents noted.
Time Inc., which declined to discuss PSE in detail, said through spokesman Peter Costiglio, “PSE has never been authorized by us to sell or advertise any of our magazines.”
And in 1996, the U.S. Postal Inspection Service in St. Louis obtained a voluntary consent agreement with Simpson, doing business as Publishers Marketplace of America Inc., followed by a cease and desist order pertaining to false billing statements, inspector Gary Miller said.
List brokers and managers are aware of PSE and because of the allegations many have stepped up measures to protect publishing clients. And an increase in incidences of mailers trying to obtain mailing lists with fraudulent sample mail pieces has alarmed the industry.
Every link in the DM chain is under renewed scrutiny.
For example, Greenwich, CT-based list management and brokerage firm Direct Media Inc. maintains an internal watch list of brokers, mailers, service bureaus, subscription agents and individuals that are potentially problematic.
“The list is the first line of defense,” said Georganne Rossi, vice president of list management at Direct Media. “Then we’re looking for things out of the ordinary.”
Sample mail pieces are being worked over with added intensity. Addresses, phone numbers and Web sites are checked for accuracy.
“We’re going two and three extra layers deep to find out who these people are,” Rossi said.
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