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

Circulation Management, Feb, 2001 by Karlene Lukovitz

A few weeks before the Florida class action suit was filed, Time Inc. president and CEO Don Logan, speaking during the American Magazine Conference, stressed the importance of the industry's development of continuous service as a standard practice in subscription marketing, but cautioned that publishers must ensure that the process is properly managed. "We're going to screw it up, if we're not careful," Logan said.

Continuous service is a linchpin for Time Inc.'s consumer marketing strategy. Over all of its titles, nearly 30 percent of subscriptions are on CS. Logan has stated that Time Inc. expects to have two-thirds of its subscriptions on a CS basis within 10 years. Time Inc. has spent more than $1 million testing and developing CS.

Credit card-based CS is a particular area of focus. Currently, about half of Time Inc.'s CS subs are on a credit card basis. Many of its DTP efforts are concentrated on developing these subscriptions, and it was the phenomenal success of Synapse Group Inc.'s credit card CS programs that led Time Inc. to acquire a 20-percent share in the subscription agency last year.

Most important, credit card CS is key to maximizing the subscription marketing benefits from the Time Warner/AOL merger. Even prior to the merger, Time Inc. was generating substantial subscription volumes through AOL. Between June and October 2000 alone, these efforts yielded 500,000 gross orders, according to Time Inc. executives.

Price-Fixing Suit: Publishers Await Summary Judgment Decision

At press time, publishers were awaiting the first ruling by the court in a consolidated class action suit alleging subscription price-fixing by 14 consumer magazine publishers and Magazine Publishers of America.

On January 10, judge Richard Casey of U.S. District Court in the Southern District of New York heard oral arguments on a motion for partial summary judgment made by the plaintiffs, on the grounds that part of the MPA's publisher subscription agent practices guidelines, released in March 1998, constitute a per se violation of the Sherman antitrust act. The motion is based on section 4a of the guidelines, which reads: "Agents shall solicit or process or clear subscription orders only if they qualify as paid circulation by the rules of the Audit Bureau of Circulations or BPA International, as applicable, unless otherwise specified by the publisher."

A decision could be issued at any time. However, sources involved in the litigation said that they expected the process to take at least a few weeks to a month. If the court rules against the plaintiffs, the judge most likely would continue the case under "rule of reason" guidelines, which would require weighing all arguments for competitive and anti-competitive effects of the 50-percent definition and the guidelines. If the court rules in favor of the plaintiffs, the case would move into determining whether the plaintiffs were damaged and, if so, the extent of that damage.