Publishers, FTC join to combat telemarketing fraud - Federal Trade Commission

On the heels of a meeting with a handful of top magazine publishers, the Federal Trade Commission cracked down in May on fraudulent telemarketers located throughout the United States.

Armed with 1995's Telemarketing and Consumer Fraud and Abuse Prevention Act, the FTC closed down operations and seized assets in New Jersey, California and Virginia. The primary targets of the sweep, National Scholastic Society, Inc. (New Jersey), Mag-Topia, Inc. (California), and S.J.A. Society, Inc. (Virginia), are accused of bilking tens of thousands of customers out of millions of dollars. Their schemes ranged from phony prize promotions to debiting customers' bank accounts without permission. In one case, the telemarketers used phony documents to make it appear that customers were being sued for subscription fees for magazines they hadn't ordered.

Rules reduce fraud

"Fraud has been a pretty large feature of the landscape for a number of years now, but the new rule has had an impact," observes Tony Hile, assistant director for marketing practices at the FTC's Bureau of Consumer Protection.

Though neither the FTC nor the Magazine Publishers of America would say who was present or what specifically was discussed, Michael Pashby, the MPA's vice president of consumer marketing and an attendee at the meeting, described the gathering as an effort by the Commission to "understand the industry and build a relationship with publishers."

"The commission's challenge in adopting the rule," acknowledges Hile, "is figuring out how to hamper fraud while not hampering business."

Advocates of self-policing

Robert Berlin, president of BGS Telemarketing, says the responsibility lies in telemarketers and magazines' self-policing, not in legislation. "The honest, legitimate telemarketing, companies are doing everything they can to win back respect," says Berlin. "It's in everybody's best interest to keep the industry as clean as possible. But, ultimately, it's up to the magazines to enforce that." In some cases, though, Hile believes ratebase pressures may be too much for publishers. "The problem is that there is an element that is interested only in subscriptions, and they don't care who sells them," he says.

Dave Leckey, vice president of circulation at Hachette-Filipacchi Magazines, says his department takes an active role in monitoring telemarketers. "We try to tighten security as much as possible," he says. "We screen all people trying to rent our names and constantly review security at call centers to make sure our list isn't walking out the back door. We'll visit our authorized agents and sit in and listen to scripts." Such diligence is rewarded, according to Leckey. He says Hachette-Filipacchi has no more than one or two customer complaints a year.

Hal Oringer, circulation director at Meredith Corporation, keeps telemarketers tightly reined as well. "We tend to be a consumer advocate," he says. "We'll cut telemarketers off after only a few complaints if no steps are taken to satisfy the customer. Then we'll immediately send a letter to the clearing house."

Oringer agrees with the self-regulation. "Any time our name is used, we want to make sure FTC guidelines are being followed," he says. "But we don't need more legislation, just more enforcement of the legislation that stands. We should use peer pressure to police this industry."

To that end, says Hile, the commission plans to meet again with magazine publishers, and to invite telemarketers' participation as well.

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