Report Blasts Firms' Online Marketing Tactics
A Senate Commerce Committee report released Monday on the eve of a Senate hearing on aggressive online marketing tactics claimed three firms knowingly charged millions of consumers for services they did not use or did not realize they had signed up for. The report is the result of a probe into the marketing tactics of three firms: Affinion, Vertrue and Webloyalty. The probe was launched after thousands of consumers complained to state attorneys general, the Better Business Bureau and consumer advocates about an enrollment process viewed as "misleading and deceptive," the committee said.
The practices at the heart of the report come into play when consumers are ready to buy a service or product online from reputable online Web sites and retailers, which have agreements with Affinion, Vertrue and Webloyalty. The three companies insert their sales offers when consumers have made their purchase but before the confirmation process is completed, according to the report. "These offers generally promise cash back rewards and appear to be related to the transaction the consumer is in the process of completing" and include misleading "yes" or "continue" buttons that may cause consumers to think they are completing their original transaction. Instead, they enter into a new transaction with Affinion, Vertrue, or Webloyalty, which charge a monthly fee after a free trial period unless consumers cancel, the report said.
The committee's report said internal documents show the firms know most consumers are unaware they have signed up for the firms' services and most cancel them after discovering the charges on their credit or debit cards. "One Webloyalty employee candidly commented in an e-mail that, 'at least 90% of our members don't know anything about the membership,'" the report said. The committee probe also claimed that some of the e-commerce sites that partner with the three firms know consumers are being deceived. The report said one company official acknowledged, "to generate more revenue through Webloyalty, it seems we must be more aggressive (and deceptive) in our marketing techniques." Some of the three firms' partners, however, have ended their relationships with Webloyalty Affinion and Vertrue or called on them to change their tactics, the report noted.
These aggressive sales tactics have been profitable, earning the three firms and their e-commerce partners a total of $1.4 billion, according to the report. Among the e-commerce retailers cited in the report as having partnered with the firms include 1-800-flowers.com, movietickets.com and restaurants.com.
In response to the report, James Hart, a senior vice president at Affinion, which announced new marketing guidelines Friday, said in a statement that his firm has "always complied with the highest standards and guidelines set for online marketers and are committed to continuously reviewing and updating those industry-best standards to ensure that our customers are always making fully informed decisions." A Webloyalty spokeswoman said the firm no longer uses many of the tactics described in the committee report. "We believe the changes we have made over the years and continue to make show that we are committed to learning from our experience and continuously improving the way we engage with consumers," Webloyalty CEO Rick Fernandes said in a statement.
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