States Sue Subscription Services Claiming FraudChristie Smythe
A group of companies that provide subscriptions to dozens of magazines and newspapers, including Sports Illustrated, National Geographic and the New York Times, were sued by five states claiming the businesses misled and overcharged consumers.
Federal and state regulators and the Better Business Bureau have received thousands of complaints about the “labyrinth” of companies, which have operated under names including Associated Publishers Network, Circulation Billing Services and Publishers Distribution Services, New York Attorney General Eric Schneiderman said Tuesday.
The companies, primarily based in Oregon, have sent millions of solicitations falsely promising “one of the lowest rates available” or renewal notices for existing subscriptions at inflated rates, Schneiderman said. After overcharging customers snared by the scam, many of whom are elderly, the companies pocket the difference, he alleged.
“It is illegal under New York law -– and the laws of most states in our union -– to trade on the name of reputable publications and trick consumers by deceptive marketing into overpaying for goods and services,” Schneiderman said in a statement.
A call to an answering service for Associated Publishers Network wasn’t immediately returned. Phone listings available from the Better Business Bureau for Circulation Billing Services and Publishers Distribution Services were disconnected or went to an unrelated business.
Mailings such as sweepstakes and subscription promotions have come under scrutiny from lawmakers and regulators over concerns they may mislead older consumers.
The U.S. Senate Special Committee on Aging in 2014 issued a report finding that Publishers Clearing House notices suggesting recipients might be eligible for prizes “may push the limits” of legal requirements for fair disclosure despite earlier regulatory settlements.
Schneiderman and attorneys general in Oregon, Minnesota, Missouri and Texas sued Tuesday seeking orders barring the subscription companies from engaging in deceptive practices and asking for unspecified restitution and penalties, he said. The non-New York filings couldn’t immediately be confirmed in court records.
Magazine and newspaper publishers, who are not alleged to be part of the scheme, have received complaints about the misleading notices and in some instances felt compelled to warn consumers or provide benefits like free subscriptions, Schneiderman alleged. The Wall Street Journal spent $3.5 million to make whole consumers duped by the mailings, he said.
Nelson Ramos, a 53-year-old software engineer who lives in the Queens borough of New York said he received a notice last year from one of the companies to renew a subscription to Harvard Business Review. While an annual subscription had cost him about $100, the renewal notice said the price was $370, he said.
The difference in price from what he had paid was “ridiculous,” said Ramos, who immediately thought the notice was a scam and contacted both the publication and Schneiderman’s office.
“I can’t just sit back and let this happen to someone else,” he said in a phone interview.
New York alleges in its suit that as many as 10 interrelated companies sent unlawful solicitations designed to mislead consumers by appearing as if they came from one of at least 38 publications.
The case is New York v. Orbital Publishing Group Inc. New York Supreme Court, New York County (Manhattan).