You’re Renewed: Like It or Not   

Magazine subscription tactics are under investigation

After a year of subscribing to Money magazine, 74-year-old Lois MacFarlane decided not to renew. But soon after her subscription expired last November, she began receiving overdue notices.

The retired nurse figured it was a mistake. That is, until she received a letter that threatened "further serious collection activities against you by Time, Inc. including being placed in the Time, Inc. Bad Debt File." Worried about her personal credit, she tried unsuccessfully to tell Money to stop sending the threats.

The Florida Attorney General's Office is looking into whether Time Inc. Magazine Group, in cases like this and others, pushed the legal envelope in the way it sells publications--including Time, Sports Illustrated, Fortune and Money. The investigation centers on one of Time's billing techniques and questions whether it ensnares accidental subscribers. The circulation-boosting tactic automatically renews the subscriptions of new and existing customers without them explicitly asking for it. Then, when the people are surprised with a bill, the company threatens their credit ratings if they don't pay.

Florida Associate Attorney General Victoria Butler has received hundreds of consumer complaints about this technique that Time calls the Preferred Subscriber Automatic Renewal Program. And with all the attention being paid to the government's inquiry into the aggressive accounting on the new-media side of AOL Time Warner, Florida's investigation into aggressive practices by old-media types has gone largely unnoticed.

Jeremy Koch, president of Time Consumer Marketing, says the company does not intend to change its circulation practices. But if a court decides otherwise, Time could face significant fines and be liable for customer refunds. Yet, whether or not the state brings legal action, the company risks tainting a sales method used by hundreds of publications that many in the magazine industry consider a key to increasing subscriptions. And this controversy comes only a few years after the industry was forced to drop another exploited technique, the much derided "you have won" sweepstakes, after the law stepped in and cried foul.

Automatic renewal is Time's attempt to move magazines to the sales model that Internet and cable providers have mastered. Not only do those businesses not have to resell every year, their customers are conditioned to handing over credit cards and carrying the onus of canceling service.

But changing the behavior of magazine subscribers--particularly those who have been sending in a yearly check since Henry Luce was cashing them--is a challenge. "For years, the industry has gotten the customer used to one way of subscribing to magazines. We've trained them to wait until the last renewal notice," says Dan Capell, editor of Capell's Circulation Report.

Time is rubbing people the wrong way by not asking readers if they want the "Preferred Subscriber's Automatic Renewal." Instead, the company converts them automatically--subscribers don't have to approve a thing. It bothers the attorney general's office that the only place Time explains automatic renewal is in small print and oblique language, often on the back of a bill.

And Time uses this "negative option" approach even though the Magazine Publishers Association recommends giving customers a "positive option" in a "clear and conspicuous manner." "The customer must take an action to demonstrate affirmative consent, such as checking a box, affixing a stamp, pushing a number on a telephone keypad, pushing a key on a computer keyboard, clicking a mouse, giving an oral response, or returning an order form," MPA says.

Time's Koch says that just returning an order form--even if a customer doesn't specifically ask for automatic renewal--meets the MPA criteria. But he acknowledges the company is on one end of that automatic renewal continuum. "We are trying to convert as many subscribers as quickly as possible," he says. "We are not tricking people, but are moving it forward with a certain urgency. If you want to subscribe, we're using automatic renewal."

By contrast, The New Republic gives people a choice. The magazine does not enroll anyone in its auto-renewal program unless they check a box on the invoice specifically requesting it. "We view it as a benefit to both us and our customers," says New Republic Consumer Marketing Director Peter Glovin, "so why not be up front about it?"

If it is indeed a win-win situation, why doesn't Time offer the same choice? "That is logical and rational," Koch agrees. "But the one thing you learn about direct marketing is that people don't necessarily act logically and rationally. They set it aside and don't send it in."

The automatic strategy works. Seven percent of all consumer magazine subscriptions are on continuous service, says Capell. But Koch says for some of Time's publications, the rate is as high as 30 percent. That's due in large part to the company's emphasis on automatic renewal, Capell says. Florida's Butler is looking into whether consumer confusion has also contributed to the high percentage.

More potentially disturbing to investigators than subscribers not getting a chance to opt in is how Time handles unwitting automatic renewal subscribers such as Lois MacFarlane. The monthly "dunning" letters start arriving, threatening to stick the wayward subscriber "in the Time Inc. Bad Debt File" and to pass their names to a "National Collection Agency--an independent, outside organization whose sole purpose is to exact payment for outstanding debts."

Butler worries that the threats scare people into renewing even if they don't want to. "It's reasonable to hold a consumer to the terms of an offer that they accepted," says Butler, who is based in Tampa, where Time's circulation operations are headquartered. "It's not reasonable to hold them to an obligation that the company is tricking them into."

The credit threat was enough for Jack Eldridge to pay up even though he didn't want another year of Money. After several threatening letters, the 77-year-old retired engineer sent in $24.95 along with a note saying he didn't want the magazine, he just wanted the notices to stop.

Koch says those who complain about all this are just a small percentage of the company's total subscribers. And he points out that Time does send out letters to remind customers of the new system before charges hit their credit cards. And further, he says, it's easy for customers to cancel their subscriptions any time, no questions asked.

Butler is also investigating Time's alleged misuse of so-called "look-alike" invoices. Under Florida law, sales pieces made to appear like bills require a "no obligation" disclaimer in 30-point boldface type. John S. Reid, a 65-year-old Grand Junction, Colorado, resident, says he was almost fooled by such a faux invoice for Sports Illustrated. He didn't send in a check but the retired police officer believes that others his age might have.

Reid doesn't understand why Time doesn't make its renewal efforts more straightforward. "Time has very good magazines," he says. "They shouldn't have to do this to get people to subscribe."