Rules & Resources
Consumer Magazine Support Center

Deductible Partnership Programs

(Reference Rule F 2.6 Partnership Sales for rule and qualification criteria)

Definition of a deductible partnership program

Subscriptions bundled with other products or services at the point of sale wherein the consumer is advised of the amount allocated to the subscription, and that amount is deductible from the package price, are classified as “Partnership Sales - Deductible.”

Price Qualification

To qualify as paid circulation, the magazine must be paid for by the consumer at an amount of one cent or more per subscription or single-copy, net of all other considerations. The sale must also be in compliance with all other provisions noted in Rule F 2.6 Partnership Sales.

Notification of Magazine and Refund Requirements

A guidebook providing instructions regarding required notification of magazine inclusion in the purchase and opportunity for refund is available on ABC's Web site.

This guidebook (last updated June 12, 2006) contains a review of the following programs: telemarketing, retail sales, Internet sales, and direct mail/catalog. In addition, examples are provided that illustrate required disclosure on consumer promotion materials.

Reporting

Average circulation served from deductible partnerships is to be reported separately within ABC reports.

Sales generated through deductible partnership programs are included in average price and valued at that amount which is refundable/deductible by the consumer if the magazine is declined.

The explanatory paragraph will disclose details of all deductible partnership sales to include program information and the allocated magazine value.

Audit Standards and Requirements

Three basic elements are required to report the deductible partnership sales as “paid circulation”:

  1. Confirmation that the consumer was notified of the inclusion of the magazine in the transaction
  2. Verification that the customer was given clear and reasonable information on how to obtain a refund instead of receiving the magazine
  3. Verification that the customer represented actually purchased the good or service
What follows is an outline of the documentation that is required and the applicable audit procedures. ABC strongly encourages publishers to have their deductible partnership programs pre-qualified to assure that the circulation generated through these programs qualifies as “paid” circulation and that records exist to assure a smooth, efficient audit.

Required for a Classification Review
A complete description of the partnered goods or services, including information regarding the “channel" (e.g. retail outlets, mail and so forth) used to sell the partnership package.

Required for Pre-qualification Review
A complete list of those items necessary to be submitted to ABC for pre-qualification of the deductible partnership program is available on ABC's Web site.

This pre-qualification review includes the following items being evaluation:

  • The partner
  • The magazine
  • The refund
  • Promotional materials
  • Audit documentation
  • Additional items

ABC Audit Test Guidelines for Deductible Partnership Sales

The following guidelines have been developed to address the audit risks specific to deductible partnership sales.

  1. Subscriber-Initiated Documents
    1. Accompanied by “Proof of Payment”: When the consumer is required to complete a form to start the subscription, and the form is accompanied by a “proof of payment” annotation completed by the retailer, the ABC auditor will accept this document as verification of order and payment.
    2. Not Accompanied by “Proof of Payment”: When the consumer is required to complete a form to start the subscription, but no “proof of payment” is submitted, the auditor may execute “negative” confirmations on selected samples to verify qualification.
    (Examples of satisfactory “proof of payment” include, but are not limited to, retailer register receipts, retail clerk verification of purchase, a subscription form available only after purchase of product has occurred.)
  2. Internet or Telephone Orders
    1. Executed by retailer partners in which the publisher or his/her subscription selling agent has no financial interest in the partner’s organization. When the consumer deals directly with the partner retailer, through their Internet site or telephone center, the auditor will accept statements from responsible management. These statements must verify the program details and attest to the volume of subscriptions sold through the program. The auditor may supplement this process with either negative or positive confirmations.
    2. Executed by retailer partners in which the publisher or his/her subscription selling agent has financial interest in the partner’s organization. The auditor will conduct negative or positive confirmations depending on specifics of the program.
    3. Executed by publishers or agents. When the customer deals directly with the publisher or with subscription selling agents, the auditor will conduct positive confirmations to verify the transactions.

Negative Confirmation Process

In a “negative” confirmation, a sample of subscribers is contacted to verify the execution of the program. Subscribers will be asked to reply only if the details of the program, as understood by the ABC auditor, are incorrect. Negative confirmation test results are considered “discovery” by ABC and could lead to an expanded review of program documentation.

Prior to initiating negative confirmation, the ABC auditor will work with the publisher in the design of the communication and the plan to contact the subscribers.

Positive Confirmation Process

Positive confirmation tests require that a sample of subscribers confirm that the information requested by the ABC auditor is correct. In the event the subscriber indicates the information is incorrect, or does not respond, these sample names are considered “no good.” Of course, the publisher will have an opportunity to contact these subscribers to have the “no good” status of their subscriptions reversed.

Prior to initiating positive confirmation, the ABC auditor will work with the publisher in the design of the communication and the plan to contact the subscribers.

ABC Review/Questions

ABC stands ready to help publishers, at all stages of the partnership process, understand partnership rules, documentation requirements and the audit process. Please contact the ABC publisher relations staff as soon as possible to assure that your proposed program qualifies under ABC rules and will be audited smoothly and efficiently.

For pre-qualification or additional information, contact your publisher relations representative.



Updated June 20, 2006