Book-of-the-Month Club Inc. has settled a civil complaint filed by the Federal Trade Commission by paying an $85,000 civil penalty and by relieving nearly 100,000 book club members of the requirement to buy a minimum number of books.
The FTC had sued the book club, the largest in the nation, for failing to disclose in advertisements that members of the club and two other clubs it owns had to pay postage and handling fees in addition to the price of the book.
Under FTC regulations, failure to disclose that additional postage and handling fees are charged is considered an unfair method of competition and a deceptive trade practice.
The FTC complaint said the information was omitted from advertising for the Book-of-the-Month Club and two subsidiaries, the Quality Paper-back Book Club and the Cooking & Crafts club. The deceptive ads appeared in more than two dozen newspapers and magazines, including The Washington Post, between February 1977 and March 1978.
In settling the complaint, Book-of-the-Month Club Inc. did not admit any violations> but signed a consent decree accepting penalties imposed by the FTC's Bureau of Consumer Protection. The settlement was filed in U.S. District Court in New York.
James Fehl, senior vice president of the New York-based book club, said ommission of the information about postage and handling fees was inadvertent. During a change in advertising format, "The line was dropped out of the ads and the FTC noticed it," he said.
"We were wrong and took the position that we would do whatever had to be done," added Fehl. He said that as part of the settlement, the customers who joined as a result of the advertising in question already have been notified that they have no obligation to buy any minimum number of books. He estimated the total number of customers who joined the three clubs as a result of the ads at about 100,000.
An FTC attorney said this is the first settlement in which the agency has required a book club to relieve affected members of their obligation to buy a minimum number of books. Book clubs and other mail order merchandisers impose the minimum purchase requirement on customers in return for a special premium for joining.
Full disclosure of all costs and obligations are a requirement of regulations adopted in 1973 by the FTC for so-called "negative option" sales plans, those in which the customer receives a product unless it is specifically rejected.