TIME INC. TO PAY $4.5 MILLION IN SUBSCRIPTION SETTLEMENT

23 State Attorneys Say Consumers Were Deceived by Automatic Renewals

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NEW YORK (AdAge.com) -- Time Inc. today agreed to a $4.5 million settlement with 23 state attorneys general who alleged their constituents had received and been charged for magazine subscriptions without their consent in a practice known as “automatic renewals.” The company will also offer compensation to affected consumers that might total $2 million to $4 million.
Time Inc. was also faulted by the New York Attorney General for sending renewal notices that looked like bills.

The subscriptions in question were automatically renewed between 1998 and May 2004, according to the attorneys general, who also faulted Time Inc. for sending renewal notices that looked like bills.

“A consumer’s ability to make good purchasing decisions begins with the adequate and meaningful disclosure of all significant terms and conditions of a contract,” said New York Attorney General Elliot Spitzer in a statement.

Under scrutiny
Time Inc. is the largest magazine publisher in the U.S. and as such has come in for its share of scrutiny during recent circulation scandals. Last summer it received a federal subpoena seeking information on its circulation practices, but has said only that is it cooperating. The settlement today suggests that the company has, like many publishers, felt strong pressure to maintain and expand circulation, which is not just a revenue source of its own but the peg for ad rates any magazine can charge.

Time Inc. admitted no wrongdoing. “We have already adjusted some marketing and collection practices for clearer disclosure of automatic renewal subscriptions,” the company said in a statement of its own. “Under the terms of the settlement Time Inc. will pay $4.5 million to cover investigative costs, to be divided by the 23 states, and we will also make a fund available to certain subscribers who respond to a claim form we will mail in June.”

The company also agreed to provide conspicuous disclosures to consumers about auto-renewals and how to cancel them.

Time Inc. estimated that 108,000 consumers may be eligible for compensation, although it pointed out that the number affected is a tiny fraction of the company’s 40 million subscribers.

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