Senate Committee Flogs Big-Name E-Tailers for Sneaky Sales Tactics
The U.S. Senate Commerce Committee has released a report slamming the online business practices of three direct marketing companies -- Affinion, Vertrue and Webloyalty -- along with hundreds of online Web sites and retailers that participate in these practices. Many of the participating retailers are well-known brand names, such as Classmates.com, Hotwire and 1-800-Flowers.com.
Essentially, these companies sell club memberships to consumers who are making purchases -- movie tickets, plane tickets, or other online goods and services -- on unrelated sites. Acting in partnership with the original "trusted" retailers, these companies insert themselves in the purchase or checkout process in such a subtle manner that consumers are often unaware they have agreed to purchase extra monthly subscription services.
Sneaking In Under Cover
These offers generally promise cash-back rewards and appear to be related to the transaction a consumer is in the process of completing, the report says. Misleading 'Yes' and 'Continue' buttons lead consumers to think they are completing their original transactions, rather than entering into a new, ongoing financial relationship with a membership club operated by Affinion, Vertrue, or Webloyalty.
"Even more misleading and confusing is the 'data pass' process Affinion, Vertrue, Webloyalty, and their partners use to automatically transfer consumers' credit or debit card information from the familiar Web seller to the third-party membership club," the report says.
After a 30-day free trial period, Affinion, Vertrue or Webloyalty begin charging the consumer a monthly fee of US$10 to $20 dollars until the consumer cancels the membership.
Classmates.com Earns $70M From Partnerships
More than 450 e-commerce Web sites and retailers have partnered with Affinion, Vertrue and Webloyalty, the report says. It relates customer experiences with three partner sites:
- 1-800-Flowers.com -- In February 2008, a Massachusetts hospital executive found he had been enrolled in Affinion's LiveWell membership club while making a purchase on 1-800-Flowers.com several months earlier;
- Restaurants.com -- A resident of Bellingham, Wash., realized after the fact that she had been signed up for a membership club called "Shopping Essentials" while buying a gift certificate from Restaurants.com;
- Movietickets.com -- A Los Angeles resident found he had joined a club called "Reservation Rewards" after making a purchase from Movietickets.com.
Other Affinion, Vertrue and Webloyalty partner companies mentioned in the Committee report:
- AirTran Holdings;
US Airways Group; and
Eighty-eight e-tailers have made more than US$1 million each through partnering with Affinion, Vertrue, and Webloyalty. Among those 88, 19 companies have made more than $10 million each, the report found. Classmates.com, which has been partnered with each company at different times and has earned more than any other partner, generated approximately $70 million in revenue.
Customers rarely realize -- at least, not at first -- which sites led them into their financial partnerships with Affinion, Vertrue and Webloyalty. The three companies deliberately handle cancellations, complaints, and other customer service issues to prevent a negative impact on the original retailers' brands. When consumers see membership club charges on their credit card or bank statements, they are given only the club name and a toll free number operated by Affinion, Vertrue or Webloyalty.
Vertrue, Affinion and Webloyalty provided emailed statements to the E-Commerce Times in response to requests for comment, pointing to changes made in their practices in recent months that address the issues raised in the report. These include "clear and conspicuous" disclosure of terms and ensuring that billing takes place only after a customer has given express informed consent.
There are other companies that use such practices, though, which means this is still a significant problem for consumers -- especially considering the current economic climate, said Jack Gillis, director of public affairs for the Consumer Federation of America.
"Most of us are buying online not only for the convenience but in order to save money," he told the E-Commerce Times, "and when we see one of these affiliated coupon programs our desire to save money can easily lead us to clicking and obtaining the benefits of the coupon. Unfortunately little do we know that in some cases we are joining some kind of membership club that will cost us $10, $15 a month."
What is particularly disconcerting is that the merchant who allows this connection is apparently passing on our credit card information, he continued. "Consumers never even have a chance to understand what is going on."
These tactics are pervasive on the Web, John W. Dozier, Jr., an attorney with Dozier Internet Law, told the E-Commerce Times.
"There is a mentality among a lot of these companies that 'when in doubt, go ahead and do it and then deal with the consequences when you are caught,'" he remarked. "I suspect that the financial benefits these companies have realized far outweigh any adverse consequences."