Another e-tailer criticized by federal lawmakers two weeks ago for profiting from "misleading" and "deceptive" marketing practices appears to be rethinking its position.
VistaPrint, an online printing company, announced Monday it has "terminated its contract" with Vertrue, a so-called post-transaction marketing company that has come under scrutiny along with competitors Affinion and Webloyalty. This summer, the U.S. Senate Commerce committee began looking into scores of consumer complaints about the marketers--some going back years.
VistaPrint said in a statement that the company's contract with Vertrue ends December 20.
The three Connecticut-based marketing firms are accused of helping well-known online stores, including Buy.com, Travelocity, Expedia, Pizza Hut, Hotwire, and Classmates.com, dupe consumers into joining loyalty programs and paying up to $20 in monthly fees. According to a government report released last month and expert testimony, perhaps as many as 30 million people have unwittingly joined these loyalty programs.
Lawmakers allege that the marketing firms presented ads to consumers during the transaction process and not only were the terms of the membership requirements obscured by large blocks of small print but the retailers also allowed the marketers to charge their customers' credit cards without the cardholder first providing the card number and expiration date.
The vast majority of transactions online occur only after a cardholder provides their own card information. Those who study consumer behavior say that many online shoppers are lulled into a false sense of security because they simply don't know retailers can sell access to their credit card information. The arrangement between the e-tailers and the third-party marketers appears to be unprecedented.
Members of the Commerce committee, who held a hearing on the practices last month, called them a "scam" and at least one discussed the possibility of arrests.
John Rockefeller, the committee's chairman, said during the hearing that Continental Airlines had informed him it planned to stop working with the marketers and U.S. Airways had indicated it would do the same.
Look for more merchants involved to wash their hands of Vertrue, Affinion, and Webloyalty. One reason is that the explanations retailers have typically offered: they received only a small percentage of customer complaints and that the marketers "offered value," to customers appear to get blown up by the government's report.
Investigators for the Commerce committee document how many e-tailers were aware that the practices employed by Webloyalty, Vertrue and Affinion misled their customers.
For example, the government presented a copy of an e-mail exchange between employees of 1-800-Flowers.com and Affinion. The worker representing the Web flower shop wrote in November 2007 that there was concern about the amount of customer complaints regarding Affinion's membership program. Did they kill the program?
"I know that our relationship with Affinion is a huge boost to our revenue," wrote the representative of 1-800-Flowers.com. "I wouldn't suggest mothballing the program since it is so lucrative."