Justice Department Ruling Helps Companies Affected by Mail-Order Fraud

A ruling by the Department of Justice could help companies limit instances of mail-order fraud.

The Department of Justice's Antitrust Division said it would not challenge a proposal by the Promotion Marketing Association to expand a previously approved information-sharing exchange designed to reduce mail-order fraud.

The Justice Department estimates that companies lose $500 million a year to mail-order fraud. The fraud is generally characterized by consumers claiming falsely that they did not receive mailed merchandise.

The proposal calls for the PMA — an association of consumer product and service manufacturers and providers — to add mail-order firms to the information exchange program. The PMA would use an existing centralized database, where participating firms can report evidence of suspected mail-order fraud.

The firms would identify potentially fraudulent claims, key those records into an electronic file and transmit them to the central database. The database manager would collect the evidence and report its findings to law enforcement officials and in aggregated form to its members.

The Justice Department's position was stated in a business review letter to the PMA from John M. Nannes, acting assistant attorney general in charge of the Antitrust Division.

The letter said the information exchanged should not have any anticompetitive effect.

“The limited nature of the proposed cooperation — no discussion of pricing or other sales related conduct and no cooperative utilization of the aggregated information — should preclude any risk of concerted pricing or collective refusals to deal,” Nannes wrote.

The Justice Department also said the PMA proposal to receive, aggregate and distribute mail-order fraud information could have a pro-competitive effect. The department said that since the database would effectively reduce the costs of mail-order fraud to manufacturers, the proposal might reduce prices and expand output to the benefit of consumers.

Under the Justice Department's business review procedure, an organization may submit a proposed action to the Antitrust Division and receive a statement as to whether the division would challenge the action as a violation of antitrust laws.

The PMA and agencies active in the promotion marketing industry established the information exchange in 1995 after consulting with the U.S. Postal Service.

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