Entertainment Coupon Book Bankruptcy: The Fallout

(Update: be sure to read this followup story: “Entertainment Coupon Book: Back From the Dead”)

Hundreds of people are out of a job, hundreds of companies and individuals are wondering if they’ll ever get the money they’re owed, and many who have an Entertainment Coupon Book are wondering whether the hundreds of coupons inside are any good anymore.

Entertainment Publications, the company that sold localized coupon books in communities and countries around the world, filed for Chapter 7 bankruptcy yesterday (read: “Entertainment Coupon Company Goes Bust”). The company has made no public statement – word about its demise emerged only after employees at the company’s Troy, Michigan headquarters were told yesterday morning that they didn’t have jobs anymore.

In a letter to the state of Michigan sent later that day, the company notified authorities of the “permanent mass layoff” and its impending bankruptcy filing. In the letter, the company describes its struggle to stay afloat financially, and how it had no choice but to fold once lenders started calling in loans.

“The company has closed its entire facility,” the letter reads. “Accordingly, the employment of all employees of the company has been terminated.” Entertainment Publications then listed 667 full- and part-time employees whom it no longer employed.

Many of those employees are named in the bankruptcy filing itself, and on the accompanying 64-page list of outstanding creditors, to which the company reported owing a total of between $50 and $100 million. Its assets, such as owned real estate, are estimated at between $10 and $50 million. Presuming those assets will be sold off in order to pay creditors, that could still leave tens of millions of dollars unpaid. Among Entertainment Publications’ creditors are other coupon companies that have offered deals on Entertainment Coupon Books, including Coupons.com, Catalina Marketing, Valassis and News America Marketing, the parent company of SmartSource.

Also named are a number of individuals who appear to have no connection to the company, other than the fact that they likely were once customers. Their presence on the list could indicate that anyone with outstanding orders or credits may not get any money back.

Angie Summers of Arlington, Texas is one of many former customers on the list. “I may have received a credit on a deal I purchased,” she told Coupons in the News, but otherwise she wasn’t aware of any money she’s owed. She didn’t even buy a coupon book this year, though she has bought the books, and used the coupons, in the past. “I think that online coupons – or all types of coupons – are so easy to access that it would be hard for a company like Entertainment Coupon Books to compete,” she said. “I am not sure if there was just too much competition for them to survive.”

Other former customers had similar thoughts. The coupons in the book were not as good as they used to be, some said. Many were the same types of offers that could be obtained for free, either online, by mail or by signing up for a company’s email list. The Entertainment Coupon Book’s increased competition, and cash flow problems, were showing.

But what of the coupons that are in this year’s books? Some are wondering whether they’re even still valid, or whether companies will honor them. The Better Business Bureau hasn’t come up with a consistent answer. The Eastern Michigan chapter, which oversees the region where Entertainment Publications was based, merely states that “it is unknown whether coupon books currently in circulation will be honored.” But the main BBB office in Washington is of the opinion that the coupons in the books are actually advertisements – and therefore subject to federal regulations that require advertising to “tell the truth and not mislead consumers.”

Coupons, generally speaking, are loosely regulated – retailers are under no obligation to accept manufacturer’s coupons, for example. And retailers that issue their own coupons can often change the terms or cancel the offer with no repercussions (as in this case: “Best Buy Bonanza Goes Bust”). But if you require customers to pay money up front, for the promise of savings later, that’s taking it to a different level. Given that customers had to pay to receive the Entertainment Book coupons – and they weren’t just given away – any business that uses Entertainment Publications’ bankruptcy as an excuse to cancel its coupon offer, runs the risk of a Better Business Bureau censure and/or a Federal Trade Commission investigation.

Knowing that the coupons themselves are still good is small comfort, though, to those who are owed money, or are out of work. Even in this economy, they don’t make coupons that can be redeemed for a new job.

(Update: be sure to read this followup story: “Entertainment Coupon Book: Back From the Dead”)