Senate Panel Slams Web Sales Tactics
The Senate Commerce Committee reports that Affinion, Vertrue and Webloyalty and their e-commerce partners have engaged in aggressive and misleading online sales tactics resulting in more than $1.4 billion in revenue.Three Internet companies-Affinion, Vertrue, and Webloyalty-and their e-commerce partners have earned more than $1.4 billion in revenue with aggressive and misleading sales tactics, according to a Nov. 16 report by the Senate Commerce Committee. (PDF)
According to the report, with the cooperation of their online partners, the three companies make sales offers-usually promising cash-back awards-during the post-transaction phase of an online purchase when consumers have made a purchase but before they have completed the sale confirmation process.
According to the report, misleading directions 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. The report claims almost no one receives the cash rewards that Affinion, Vertrue and Webloyalty offer to online consumers at the time of enrollment.
There have been more than 30 million consumer enrollments in these clubs and several million people are unknowingly enrolled in these clubs at any one time, according to the report. Consumers often do not know these companies have their credit card numbers until they start seeing charges on their bank statements.
"After six months, this committee has found that the companies we are investigating have figured out very clever ways to manipulate consumers' buying habits so they can make a quick buck," Sen. Jay Rockefeller, chairman of the Committee on Commerce, Science and Transportation, said in a statement released with the report. "American consumers have been complaining for years about these misleading practices and asking for answers-and rightly so. Millions of Americans are getting hit with these mystery charges every month-we have to do all we can to protect the hardworking families relying on us to look out for their wallets and wellbeing."
Rockefeller and the Commerce Committee held the first of a planned series of hearings on online sales tactics Nov. 17. Affinion, Vertrue and Webloyalty were not invited to participate in the first hearing.
The report noted that many of these controversial practices are new to e-commerce, but are well-known in other commercial channels, especially in direct mail and telemarketing, and have been the subject of numerous legal actions. Affinion, Vertrue and Webloyalty are all operated by management teams that have years of experience in employing these aggressive sales tactics against consumers, it said.
Even more misleading and confusing, according to the report, 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. After a 30-day free trial period, Affinion, Vertrue or Webloyalty begin charging the consumer a monthly fee of $10 to $20 dollars until the consumer cancels the membership.
In advance of the Nov. 17 hearing, Affinion's James Hart, senior vice president of Communications and Brand, issued a statement saying, "Affinion is proud of its longstanding history of employing the best marketing practices in the industry and how our programs provide tremendous value for millions of consumers worldwide. That's why last week we voluntarily announced new enhanced marketing guidelines in order to make certain that consumers give clear and informed consent for online purchases and have access to easy-to-understand billing language and customer service information."
According to Affinion, the new consumer guidelines apply the spirit of the regulations the FTC implemented for telemarketers to online marketers, including requiring that the consumer give-at a minimum-the last four digits of his or her account or credit card number for every online transaction involving preacquired account information and a free-to-pay conversion.