Announced Actions for April 8, 1998

Staff of the Federal Trade Commission has advised the Magazine Publishers of America (MPA) that it would not recommend a challenge on antitrust grounds to the adoption of proposed Guidelines on Relations with Subscription Agents (Guidelines) by its members. The proposed guidelines, according to MPA, are designed to prevent violations of statutes and rules governing telemarketing by independent sales representatives acting on behalf of magazine publishers.

MPA is the trade association for consumer magazine publishers -- its membership includes 190 domestic magazine publishing companies that publish about 780 magazines. Some years ago, MPA promulgated industry guidelines for publisher relations with subscription agents. MPA states that the present guidelines represent a substantial revision to deal more directly with subscription agents, and particularly telemarketing agents, to address concerns expressed by FTC staff regarding the level of consumer complaints relating to magazine subscription telemarketing sales. MPA characterizes these Guidelines as an effort by the industry to better regulate itself so as to deal with this problem, and requested an advisory opinion from the FTC.

MPA’s proposed guidelines state that they are "recommended" for adoption by member and non-member publishers and authorized subscription agents. The Guidelines provide that agents will take reasonable steps to ensure that salespersons follow ten specific rules, which are intended to generally paraphrase the key provisions of the FTC’s Telemarketing Sales Rule. Thus, for example, agents will be obliged to take reasonable measures to ensure that salespersons "promptly and truthfully disclose to consumers the name of the seller and the purpose of the contact," and "use sales scripts presentations and written materials that clearly and truthfully disclose all material terms of the subscription offer including the publications being offered or ordered, their frequency and duration, the cost (including any extra charges) to the consumer, the payment terms, and if required by law, the sellers’ cancellation and refund policies." The Guidelines also provide basic rules for supervision of salespersons, including appropriate training, verification of sample orders, and routine monitoring of telemarketers.

The Guidelines go on to set up a system for control of subagents. MPA notes that because small subscription agents typically process orders through a pyramid of other agents, the identify of the agents who initially solicited each order is usually lost, and thus the publisher or authorized agent loses its ability to effectively monitor or police those agents. The Guidelines therefore provide that every agent, subagent, or sub-subagent must be identified by name and federal E.I.N. or Social Security number, which must be submitted to the publisher, and the publisher has the right to direct that any agent be dropped from the list. The Guidelines provide that agents agree that they will "prevent the use of false or deceptive selling methods to solicit magazine subscription orders, and that they will diligently monitor the activities of their Salespersons (excluding Salespersons who submit subscription orders to Subagents and Third Parties if these monitoring responsibilities have been delegated to those Subagents and Third Parties)."

Though it will not retaliate against any nonconforming publisher, MPA intends to obtain an agreement among publishers that they will implement these Guidelines uniformly and simultaneously.

In the response to counsel for MPA, Michael J. Bloom, Director of the FTC's New York Regional Office noted that the antitrust laws do not forbid legitimate self-regulation that benefits consumers. Citing previous case law, Bloom noted that in American Academy of Ophthalmology, the Commission has stated, "Such self-regulatory activity serves legitimate purposes, and in most cases can be expected to benefit, rather than to injure, competition and consumer welfare."

"There appears to be little risk that concerted implementation of these Guidelines by publishers will adversely affect competition among publishers in the marketing of their magazines, nor does it appear to be a means of camouflaging an otherwise unlawful agreement. The Guidelines are narrowly tailored to achieve the stated and laudable purpose of preventing violations of the Telemarketing Sales Rule and other consumer protection enactments," the letter states.

In concluding, Bloom said that "to the extent that the information provided to consumers by sellers of magazine subscriptions is, as a result of adoption of the Guidelines, more complete, reliable, and unencumbered by other deceptive selling practices, adoption of the Guidelines will have a procompetitive effect: it will reduce consumers’ information costs, enhance efficiency, and, likely expand output."

NOTE: This letter sets out the views of the staff of the Federal Trade Commission, as authorized by the Commission's Rules of Practice. It has not been reviewed or approved by the Commission. As the Commission's rules explain, the staff's advice is rendered "without prejudice to the right of the Commission later to rescind the advice and, where approproiate, to commence an enforcement proceeding."

Copies of the advisory opinion are available from the FTC's web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-FTC-HELP (202- 382-4357); TTY for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.