Magazine Marketers Settle FTC Charges; Ordered To Pay $88,000 for Federal Law Violations

A Virginia telemarketer, S.J.A. Society, Inc., and two principals will be ordered to pay $88,000 to settle Federal Trade Commission charges that they used fraud and deception in their magazine marketing business in violation of federal laws. Thomas P. Johnson and Thomas Alan Blair were targeted in a federal/state crackdown on fraudulent magazine marketers who made deceptive and misleading statements to get consumers' credit card or checking account numbers, billed the accounts -- including accounts of consumers who never agreed to order any magazines at all -- hundreds of dollars in supposed "shipping and handling" fees, and then posed as third-party debt collectors and attorneys to collect their bills. The FTC filed a complaint against the firm and its principals in federal district court and the court issued a temporary restraining order, an asset freeze, and the appointment of a receiver. This settlement would resolve the court action.

Virginia Beach-based S.J.A. and the principals also did business under the names Apex Marketing Group, Atlantic Service Corp., ASC, and Publishers Service.

In its complaint the FTC alleged that SJA's telemarketers contacted consumers telling them that because they were such good customers, SJA was going to send them "bonus" or "prepaid" magazines. During the sales pitch, the telemarketers sometimes promised consumers prizes, coupons, airline tickets or cash. Consumers were told they would be expected to pay only nominal "shipping and handling" charges of $2.65 a week. In fact, SJA billed consumers vastly inflated amounts for magazines -- more than the full cost of the magazine subscriptions offered by the publishers at regular price. Consumers who tried to cancel orders were harassed and threatened with law suits by SJA employees who misrepresented that they were independent bill collectors. The FTC alleged that these deceptive practices violated federal laws.

In addition, the agency alleged SJA's unauthorized debiting of consumers' checking accounts violated the Telemarketing Sales Rule, and threats, intimidation, and misrepresentations used to collect funds, violated the Fair Debt Collection Practices Act.

Under the agreement to settle the charges, the defendants will be ordered to pay the $88,000 penalty. The agreement also will bar misrepresentations:

• that consumers will receive any prize, cash, airline ticket or coupon;
• that a consumer can receive magazines by paying only shipping and handling or processing fees;
• that consumers can cancel any transaction;
• about the cost of any magazine;
• about the validity or enforceability of any contract; and,
• that a consumer is or previously has been a customer.

In addition, the defendants would be required to:

• accurately disclose its charges for subscriptions;
• allow a 30 day cancellation period;
• credit consumers' credit card accounts or issue refund checks within seven business days from receipt of cancellation.

Finally, the order bars future violations of the Telemarketing Sales Rule and the Fair Debt Collection Practices Act and prohibits the telemarketers from selling or giving away their consumer contact lists.

The FTC has two publications, "Facts for Consumers: Magazine Subscription Scams," and "Do the Math: Magazine Subscription Scams Don't Add Up," to help consumers avoid being taken in by magazine scams.

The Commission vote to file the proposed settlement in U.S. District Court for the Eastern District of Virginia, Norfolk Division was 4-0.

NOTE: A stipulated final judgment is for settlement purposes only and does not constitute an admission of a law violation. Consent agreements have the force of law when signed by the Judge.

Copies of the complaint, and proposed settlement are available on the Internet at the FTC's World Wide Web site at: http://www.ftc.gov. FTC documents also are available from the FTC's Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired 202-326-2502. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.

(Civil Action No. 2:97cv-472)
(FTC File No. X97 0061)