Today, it was revealed that a high profile Internet / direct response marketing company has been  “hiding” its forced continuity program.

In other words, rather than tell people upfront that they’d be billed a certain amount of money per month on an ongoing basis until they cancel their subscription… this company has NOT been warning people, and has, instead, been billing their credit cards regardless.

It’s NOT on.

Now I’m a fan of forced continuity - it’s good for creating a regular stream of income for the company, and it’s good for the customer who doesn’t have to worry about ensuring their subscription or membership is paid up. But not obtaining the customer’s express consent before putting them onto continuity is downright illegal, unethical and BAD marketing.

I hope this particular company - and certain others that have adopted similar practices - is taking notice of the uproar on the blogs and forums about their tactics. Certain people are an inch away from filing complaints with the U.S. Federal Trade Commission.

But I don’t want to see this company go down. The company’s founder is a legend in direct response marketing and I’ve personally learned a lot from him. I want him to continue providing the top-notch marketing advice he’s renowned for!

And frankly, I don’t want this company to undermine the concept of continuity. The more these underhanded tactics go on, the more people will be reluctant to go on any kind of continuity billing program - even one where it is clearly explained to them, and where they can back out (without a hassle) at any time.

Penthouse Media Group Inc., publisher of the well-known men’s publication, Penthouse Magazine, has acquired Various, Inc. which owns the leading adult meeting site, Adult FriendFinder, for $500 million in cash and securities.

Was this a good deal for Penthouse? Without knowing exactly what Various, Inc’s profits are - its projected 2007 revenues are $340 million - nor Penthouse’s expected return on investment (ROI) and timeframe for achieving that ROI… ONE simple calculation reveals that the FriendFinder network presents an extraordinary opportunity.

Here are the key statistics from Penthouse’s press release…

– The FriendFinder network has around 260 million free members. Pretty impressive, huh?

– The paid members number 1.2 million. Not bad…

For simplicity’s sake, let’s assume that each of the paid members is also a free member. What that means is that Various has been able to convert a whopping… 0.46% of free members into paid members! If we consider paid members to be additional to free members, the conversion rate is even lower.

So if the average conversion rate of 0.46% translates into $340 million in revenues overall… what would increasing that conversion rate to 1% mean? I don’t have enough data to know, but you can be sure that it would have a MASSIVE impact on profits.

Make no mistake. Various, Inc. appears to be a highly successful company. But with just a 0.46% conversion rate, it has been leaving a lot of money on the table. If Penthouse does nothing more than focus on increasing conversion rates across all the Various, Inc. media properties… it will have made a very good acquisition indeed.

Of course, whether Penthouse has that intention or capability, is a completely different story…

Warley Hospital, a not-for-profit community hospital located in Cowes, on Phillip Island - a popular coastal tourist spot in Victoria, Australia - is on the verge of closure.

This small, rural hospital has 35 aged care and 13 acute care beds and employs 80 full-time, part-time and casual staff including nurses. According to the vice-president of the hospital’s board, Gwen McRae, Warley Hospital provides essential services for both the island’s 8,000 permanent residents, and the hundreds of thousands of tourists who visit each year.

Up to 50,000 people visit Phillip Island on a daily basis over summer and many thousands visit during the annual Australian motorcycle Grand Prix. Meanwhile, the nearest hospital is located at Wonthaggi, a 45-minute drive along the only road connecting Phillip Island to the mainland.

The board is calling on the State and Federal governments to contribute funds to keep the hospital going… but my question is: should the government pitch in to save a private hospital? Is it the government’s responsibility?

Yes, of course, adequate medical and hospital services should be available to any given community… and, if the closure of the Warley Hospital means that the community will not have access to sufficient care, the relevant government should consider upgrading facilities at Wonthaggi, investing in or buying Warley, or providing a public facility on Phillip Island.

But should the government - i.e. the tax payer - simply give the hospital a stack of money so it can continue to offer services that are essentially only available to private patients i.e. people with private health insurance? It may be a not-for-profit, but it’s still a private hospital based on the “user pays” principle. So why should the government be putting in money into a service that isn’t available to the general public?

Now I don’t know all the facts. But that’s the problem. The media releases a story about a poor hospital about to go bust unless the government (pick any one) puts in money. We’re not told whether the hospital has been mismanaged or why it can’t keep operating. We’re told that it’s essential to service the local community… but how a 48 bed hospital can cater to an up to 50,000 daily population I don’t know… unless that’s the reason its struggling… or unless the community is actually being looked after reasonably well by the hospital in Wonthaggi.

Overall, too little information has so far been made publicly available for the average person to make a call on this. Hopefully the various governments have been given more information with which to make a decision…

Personally, I find the idea of a hospital going bust and 80 people losing their jobs very disturbing. But I’m also a big believer in the private sector and the desire for it to be largely self-sufficient. While there’s a strong argument for governments to invest to some extent in private hospitals to help alleviate the burden on the public health care system… that doesn’t quite work if they end up having to bail out such private hospitals!

So… anyone want to buy and turnaround a country hospital?

As a lawyer, I’ve been trained to think in terms of absolutes - you either comply with the law or not. Sure, there are many grey areas - but these generally relate to a lack of clarity over what the law is, not whether or not it should be complied with. Consequently, my job is to not only advise you of what the law is, but to advise you to comply with the law.

In other words, it’s out of the question for me to recommend that you break the law. Not to mention that to do so would be a breach of my own duties to the courts!

But from a financial risk point of view, whether or not to comply with a given legal obligation - or the extent of compliance - is a decision based on the estimated financial consequences of complying or not complying. That’s how many, if not most, companies view legal compliance. As just another risk to be evaluated.

Taking off my lawyer’s hat, I can understand this point of view. When it comes to”technical” breaches or breaches that don’t appear to really “hurt” anyone, I can understand why breaking the law may simply be regarded as a financial risk that may or may not be worth taking.

But, at the same time, I can’t help but think that regarding legal compliance as an option based on a cost-benefit analysis (or, even worse, what the business can “afford”) is often the beginning of a slide down a very slippery slope… a slide that can very easily end up in a place where there’s a rampant disregard for the law… and which can lead to a business being caught out and being practically destroyed as it fails to defend itself against lawsuits, government fines and the like.

You’re probably aware of the large-scale corporate collapses of recent years… Well, many, many small businesses implode every day because of the fall-out from failure to comply with the law.

So, while I’m enough of a pragmatist to recognize that legal compliance is often viewed as a cost-benefit equation… I also believe in the importance of adhering to the law. Yes, I actually believe that our elected officials are the people with the mandate to make the rules. (Here in Australia at least!)

Plus, whilst the “risk management” attitude to legal compliance may be “realistic”, it also reflects a kind of laziness. After all, a business that decides that its only option in a given situation is to breach the law… is a business that isn’t creative or innovative enough to come up with business solutions.

What can I say: disregard the law at your own risk!