Online Direct Marketing Tactics Get Hazed in the Senate

There’s been some noise about deceptive online sales tactics lately, and the latest has come in a report from the Senate Committee on Commerce, Science, and Transportation that aims at Affinion, Vertrue, and Webloyalty, accusing them of using “highly aggressive sales tactics to charge millions of American consumers for services the consumers do not want and do not understand they have purchased.”

The report stops short of calling the practices of the companies scams, but the charges, based on an investigation launched by Chairman Jay Rockefeller, are strong. All three companies reportedly use relationships with “reputable online websites and retailers,” including the following:

• 1-800-Flowers.com, Inc.
• AirTran Holdings, Inc.
• Classmates.com, Inc.
• Continental Airlines, Inc.
• FTD, Inc.
• Fandango, Inc.
• Hotwire, Inc.
• Intelius, Inc.
• MovieTickets.com, Inc.
• Orbitz Worldwide, Inc.
• Pizza Hut, Inc.
• Priceline.com, Inc.
• Redcats USA, Inc.
• Shutterfly, Inc.
• US Airways Group, Inc.
• VistaPrint USA, Inc.

In return for payment, these companies let Affinion, Vertrue, or Webloyalty pitch consumers on club memberships in the process of buying the expected goods or services.

With the cooperation of their online “partners,” the three companies insert their sales offers into the “post-transaction” phase of an online purchase, after consumers have made a purchase but before they have completed the sale confirmation process. These offers generally promise cash back rewards and appear to be related to the transaction the consumer is in the process of completing. Misleading “Yes” and “Continue” buttons cause consumers to reasonably think they are completing the original transaction, 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. Passing consumers‘ billing information directly to Affinion, Vertrue, or Webloyalty, without requiring consumers to re-enter it, deprives consumers of notice that they are entering a new, ongoing financial relationship with an unfamiliar company. After a 30-day “free trial” period, Affinion, Vertrue, or Webloyalty begin charging the consumer a monthly fee of $10-$20 dollars until the consumer cancels the membership.

It’s an old direct marketing scheme, and supposedly the people running the three companies “have years of experience in employing these aggressive sales tactics against consumers.” According to former employees of the firms questioned in the investigation, up to 98 percent of the customer service calls are fielding demands for refunds.

Webloyalty was apparently the target of a class action suit that ended in August with a $10 million settlement. The company claims that it has changed its policies so it now requires reentry of the last digits of a credit card and sends multiple emails before charging the card. Of course, it will be the form of the notifications that will tell whether consumers are making informed purchases.

Michael Arrington at TechCrunch has been going on about some of the tactics used by some social network gaming companies:

In short, these games try to get people to pay cash for in game currency so they can level up faster and have a better overall experience. Which is fine. But for users who won’t pay cash, a wide variety of “offers” are available where they can get in-game currency in exchange for lead gen-type offers. Most of these offers are bad for consumers because it confusingly gets them to pay far more for in-game currency than if they just paid cash (there are notable exceptions, but the scammy stuff tends to crowd out the legitimate offers). And it’s also bad for legitimate advertisers [on the social networks].

Image via Flickr user Don Hankins, CC 2.0.