The solicitations were sent without the permission of the publishers and stated that consumers were receiving “one of the lowest available rates,” when, in fact, they were being charged, in some cases, more than double the publication price. The companies then pocketed the difference.
“It is illegal under New York law to trade on the name of reputable publications and use deceptive advertising to trick consumers into overpaying for goods and services,” said New York Attorney General Eric T. Schneiderman. “New York is home to the largest media market in the country and serves as headquarters to many of our nation’s most important newspapers and magazines. My office will work hard to protect New Yorkers from swindlers and to protect the business of reputable companies who play by the rules.”
Joining in the lawsuit against Orbital Publishing Group, Inc., and affiliated companies were Oregon, Minnesota, Missouri and Texas.
44 publications
Schneiderman’s lawsuit alleges that, from at least 2010 to the present, the companies sent consumers unlawful solicitation notices designed to look like they came directly from at least 44 publications. The victimized publications include some of the nation’s leading periodicals, including Consumer Reports, National Geographic, the New York Times, the Wall Street Journal and the Washington Post.
Dow Jones, in an affidavit filed as part of New York lawsuit, stated that it has spent $3.5 million in responding to the unauthorized notices, including by offering free subscriptions. American City Business Journals estimates that its subscribers, who were charged double the publication’s real subscription price, have lost as much as $120,000 as a result of the companies’ allegedly deceptive practices.
“This sophisticated mail scam ripped off thousands of Oregonians and others across the country,” said Oregon Attorney General Ellen Rosenblum. “Consumers thought they were dealing with legitimate companies, and that they were paying the lowest available price. Instead, they sent payments to a dishonest third-party, who pocketed the money."
“They used deceptive ‘renewal’ notices to get people to unwittingly pay significantly more for their newspaper or magazine subscriptions,” said Minnesota Attorney General Lori Swanson.
Pocketed the difference
According to the court papers, once the companies received orders from consumers, typically at exorbitant prices, the companies sent a check to the publishers for the actual subscription price, so that the consumer’s subscriptions were started or renewed, and then pocketed the difference.
For example, the companies charged consumers as much as $59.95 for annual subscriptions to Consumer Reports that cost $29.95. They charged Wall Street Journal consumers $599.95 for a one-year subscription that cost $413 at retail. The New York Times estimated that the companies charged consumers a price that is 30 to 40 percent higher than the actual subscription cost of The Times. Many publishers are no longer accepting orders from the companies.
According to the New York lawsuit, the solicitation scams were operated by a labyrinth of corporate entities, which were allegedly created to disguise the scheme.
The solicitation companies have used dozens of different names to solicit consumers, including Magazine Payment Services, Associated Publishers Network, Publishers Periodical Service, United Publishers Service, Publishers Billing Exchange, Publishers Billing Association, Publishers Billing Center, Magazine Billing Network, Publishers Distribution Services, Magazine Distribution Service and Subscription Billing Service. The solicitations generally contained a return address in White City, Oregon, Henderson, Nevada, or Reno, Nevada.
The lawsuits seek to stop the alleged illegal business practices, return money to consumers, disgorge any profits related to these alleged illegal activities, and penalties.
Marketers grateful
The Direct Marketing Association, a trade group, helped gather information on the scam and expressed gratitude to the state AGs for their action.
"Examples like this demonstrate that enforcement action from state and federal authorities, coupled with nimble and quick-to-adapt industry self-regulation, helps to protect consumers from bad actors and advances consumer trust in the marketing industry,” said Senny Boone, General Counsel for the Direct Marketing Association.