Fraudulent Magazine Marketers Settle FTC/State Charges

National Scholastic Society, Inc., doing business as University Society Publishers Periodicals, and David C. Beasley, Jr., have agreed to post a $250,000 performance bond before engaging in any telemarketing activities in the future as part of a settlement agreement with the Federal Trade Commission and the State of New Jersey. In addition to posting a bond, the proposed settlement would prohibit the defendants from tricking consumers into revealing their credit card account numbers.

In May 1997, the FTC and the Attorney General of New Jersey as co-plaintiffs filed a complaint in federal district court against the Ramsey, New Jersey-based company and its owner, as part of a nationwide crackdown on fraudulent magazine marketers that used a variety of ruses to bilk consumers out of millions of dollars. The complaint alleged that the defendants misrepresented: 1) the reasons why they needed consumers’ credit card information, and 2) that they would not bill charges to consumers’ credit card accounts without the consumers’ written authorization. According to the complaint, the defendants sent consumers a postcard urging them to call a toll-free number. When the consumers called, they were told they would be entered into a $25,000 cash sweepstakes just for calling. The defendants then pitched magazine subscriptions and told consumers they would receive expensive-sounding gifts if they agreed to purchase a subscription. Company representatives tricked consumers into revealing their credit card numbers and then billed their accounts without authorization, according to the FTC complaint. Even consumers who did not agree to subscribe were billed for hundreds of dollars.

In addition, the FTC and State of New Jersey alleged that the defendants violated the Telemarketing Sales Rule (TSR) by failing to disclose the odds of winning a prize, the conditions associated with the defendants’ coupon offer, and that the defendants did not allow cancellation.

According to the proposed settlement, which requires the court’s approval, the defendants are permanently prohibited from making the misrepresentations alleged in the complaint and are prohibited from violating the TSR. In addition to posting the $250,000 bond, the settlement would require the defendants, if they tape record any portion of a sales call with consumers, to include in the tape recording all material elements of the sale. The settlement also contains various reporting provisions to help the Commission monitor the defendants’ compliance.

The FTC filed the stipulated final judgment and order in the U.S. District Court for the District of New Jersey, in Newark on April 7, 1998. The Commission vote to file the proposed settlement was 5-0.

NOTE: This stipulated final judgment and order is for settlement purposes only and does not constitute an admission by the defendant of a law violation. Consent judgments have the force of law when signed by the judge.

Copies of the settlement and other documents associated with this case 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); TDD 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.

(FTC Matter No. X970043)
(Civil Action No. 97-2423 (WHW))