• by Michael Shields , January 25, 2005

Publishers Communication Systems (PCS), the magazine subscription agent that Gruner + Jahr (G+J) implicated in a widespread rate base shortfall for the majority of its magazines, blasted the publisher in a statement released yesterday that called its allegations "unfounded and without merit," and said that G+J had been motivated to sully the agent's business reputation to distract from its own problems.

Earlier, on January 11, it was revealed that many of G+J's flagship titles--including Parents, Child, Family Circle, Inc., and Fast Company--had overreported circulation in the past year, and were in danger of missing their advertising rate base.

G+J CEO Russell Denson explicitly blamed PCS President and CEO Walter Stevens, saying that his company failed to provide the Audit Bureau of Circulations (ABC) documentation for a portion of contracted subscriptions after numerous warnings. As a result, G+J filed a lawsuit against PCS.

Now, PCS is firing back, accusing G+J of protecting its own hide. In a statement, the company called the lawsuit "unfounded, without merit and a result of G+J's circulation shortcomings."

In addition, Stevens issued the following inflammatory statement: "G+J's circulation and rate base problems are no secret in the industry. The allegations in the complaint are unfounded and without merit.

"Motivated solely by rate base pressures, G+J has taken an unprecedented self-serving action publicly vilifying a subscription clearing company with 31 years of providing reliable and responsible service to multiple publisher clients.

"This action, designed for advertiser consumption and to injure the reputation of PCS with other publishers, serves no purpose other than to distract attention from G+J's internal circulation shortcomings. Further, it is a conspicuously rash action in that PCS is still in the process of communicating with ABC on documentation related to this issue.

"PCS categorically denies any wrong doing in this matter and will vigorously defend the litigation."

On Monday, G+J officials dismissed PCS's side of the story. "G+J's lawsuit speaks for itself," said a G+J spokesperson. "It is unfortunate that PCS will not accept responsibility for their own misconduct. PCS was well aware of the ABC rules, and they were given ample time to provide adequate documentation to ABC, but failed to do so."

The ugly he-said, she-said between the two companies has the potential to slow the image repair work that G+J's Denson has undertaken since coming on board last year.

"This is kind of a really big deal," said Ginger Taylor White, director of print services at Carat USA. "We personally felt a little bad for G+J [when the previous news came out]. But with this announcement, there is truth in both sides. What I thought two weeks ago and what I think now is different."

White said that when G+J made its announcement about circulation discrepancies, she requested written statements from other major publishers about whether they worked with PCS to answer any client concerns. While publishers like Meredith said they had never worked with the agent, White said that Time Inc. had, indicating that any problem with the company's practices could have a major impact on the magazine business.

While newly skeptical about G+J's contention, White found PCS's decision to speak on the matter nearly two weeks after being sued to be odd.

"If I am accused of something I didn't do, on day one I am screaming about it," she said. "We really have to wait for the facts to come out."