Time Inc.'s Use of Credit Card Data Under Scrutiny in Florida

Circulation Management, Feb, 2001 by Karlene Lukovitz

GIVEN MAGAZINE PUBLISHING'S RECENT LEGAL HISTORY, SOME ARE CONCERNED THAT OTHER AG'S OR CLASS ACTION ATTORNEYS MIGHT, LITERALLY, FOLLOW SUIT.

Behind the scenes, some publishing executives are expressing concern that legal rumblings in Florida focusing on Time Inc.'s subscription marketing practices could trigger more legal complications for the industry and potentially put continuous service offers in an unfavorable light.

In mid-December, a single plaintiff, Victoria McLean of Valrico, Florida, filed a class action suit in circuit court in Hillsborough County charging Time Inc. and Ticketmaster with making unauthorized credit card charges and illegally sharing confidential financial information in the context of trial subscription offers.

In addition, Florida's Economics Crimes Office, an arm of the attorney general's office, is engaged in an ongoing investigation of consumer complaints about Time Inc.'s practices. That investigation is also focusing on use of credit card information, according to the state's assistant attorney general, Victoria Butler.

At press time, Time Inc. had not yet responded in writing to the class action suit. However, Time Inc. spokesperson Peter Costiglio stressed that subscription offers made through Ticketmaster are clear, straightforward and "compliant with all appropriate rules, regulations and laws."

Given recent history, magazine publishers have good reason to be concerned about any sign of legal clouds. The industry was still licking its wounds from the sweepstakes crisis when it was embroiled in another costly, and still unresolved, legal battle. Beginning last June, more than 20 class action suits were filed alleging that 14 major consumer publishers and Magazine Publishers of America had conspired to keep subscription prices artificially high. The suits, which were later consolidated into a single complaint, claim that the defendents engaged in price-fixing through the audit bureaus' 50percent-of-basic price definition of paid subscriptions and the MPA's publisher guidelines for monitoring subscription agent activities. (See item on next page for latest developments in the price-fixing case.)

"The Florida situation could well turn out to be isolated and shortlived, once the facts are clear," says one industry source who requested anonymity. "But the concern is that we know all too well that AG's tend to follow one another's leads. That was certainly demonstrated with sweepstakes. The other concern is that the publishing industry has become a target for class action suits, regardless of the substance of those suits. "

Other publishing and subscription marketing sources echoed those concerns, and one noted that Florida attorney general Robert Butterworth was among the most aggressive litigators during the sweepstakes crisis.

Although the practice of continuous service (CS)/ itself is not the focus of the class action suit or the investigation, consumer marketers also expressed concern about any potential for negative publicity at a time when a growing number of publishers are looking to improve circulation economics by gaining consumer acceptance of CS and employing such offers in subscription marketing partnerships.

SUIT CLAIMS UNAUTHORIZED USE

The Florida class action suit involves Time Inc.'s successful partnership with Ticketmaster, in which consumers who call in to order tickets for sports or entertainment events are offered an eight-week trial subscription to Entertainment Weekly or Sports Illustrated. Last spring, a Time Consumer Marketing Inc. executive reported that the Ticketmaster partnership is now EW's largest source of new business (April 2000, page 42).

The suit alleges that, while ordering tickets for a Who concert last August, McLean declined an offer for an eight-week trial subscription to Entertainment Weekly, as well as an offer for various Who-related merchandise. According to the suit, a few weeks later, McLean noticed a $372.17 charge for Who merchandise on her credit card. In addition, McLean received a notification, on dual EW/Ticketmaster letterhead, that her trial subscription to EW had been entered and that her credit card would be billed at the end of the trial unless she cancelled the subscription through a toll-free number or customer service Web site. McLean says that she canceled the trial subscription, and also canceled her credit card because of security concerns resulting from the transfer of her account information from Ticketmaster to Time Inc. The suit cites a Florida statute (817.646) that makes disclosure of credit card account information without the consent of the cardholder a first degree misdemeanor.

McLean's attorney, Christopher Casper, told CM that he had heard the same types of complaints from other consumers prior to the filing of the suit, and that he had heard from "many more" consumers since the filing. At press time, he said that it was possible that more plaintiffs would be added to the complaint. Casper also noted that, even if the case were certified by the court as a class action suit, the likelihood that it will go to trial is small. "More frequently, you'll see with a class action certification that a settlement can be reached," he said.