Here's a summary......
The Senate Committee on Commerce, Science, and Transportation released a Staff Report for Chairman John D. (Jay) Rockefeller IV (D-WV) dated November 16, 2009 addressing aggressive sales tactics on the Internet and their impact on American consumers (“Report”). The release of the Report coincides with a hearing held by the Senate Commerce Committee on November 17th covering the same topic.
The Report, which was prepared by the Office of Oversight and Investigations Majority Staff, provides an overview of an investigation that Chairman Rockefeller instituted in May 2009 against three direct marketing companies (Affinion, Vertrue, and Webloyalty) engaged in e-commerce practices that had resulted in consumer complaints. The Report states that while the investigation is not complete, staff has concluded that the companies have been engaged in highly aggressive sales tactics that have resulted in millions of consumers being charged for services they neither wanted nor understood that they had purchased. The Report explains that such tactics involve providing consumers with unfamiliar services from unfamiliar companies while consumers are in the middle of purchasing services from sites that the consumers trust. A brief summary of the Report follows below.
Key Findings from the Investigation
While the investigation has yet to conclude, the Report states that the staff has made the following findings:
(1) Aggressive sales tactics to sell membership clubs to consumers who do not want them is a billion-dollar business;
(2) Well-known websites and online retailers use aggressive sales tactics and earn millions of dollars doing so;
(3) The three companies under investigation knowingly charged consumers for services they were unaware they had purchased;
(4) The customer service centers of the three companies under investigation primarily handle calls from consumers who are upset, confused, and/or would like to cancel their memberships; and
(5) Those companies conducting business online that have partnered with the three companies under investigation know that customers are harmed by such aggressive sales tactics.
Growth of E-commerce
The Report states that e-commerce has grown over the years into an important channel for commerce, and was responsible for over $60 billion of retail sales in the United States in the first part of 2009. The Report says that e-commerce has encouraged innovation over the Internet but has also led to aggressive sales tactics.
Sales Practices Migrating to Online
The Report explains that the companies under investigation have used such tactics in the offline context for years. Specifically, the Report notes that the companies enter into agreements with “reputable” online retailers, and in exchange for payments, sell memberships to consumers as they are in the process of purchasing other items from the retailers.
Consumer Expectations
The Report takes the position that offering such memberships during the checkout process exploits the expectations of consumers about how such checkout processes function. The Report explains that the “Yes” and “Continue” buttons mislead consumers into believing that they are completing a transaction with the online retailer with which they are familiar rather than entering into a new agreement with a different company.
Transfer of Consumer’s Billing Information to Third Parties for Ongoing Charges
The Report raises concern with the practice of the online retailers transferring consumer’s financial billing information automatically to the three companies under investigation. The Report states that the practice fails to provide consumers with sufficient notice that they are entering into new agreements that will result in monthly charges to their financial accounts.
Senate Commerce Committee Investigation
The Report explains that the Senate Commerce Committee instituted an investigation into the practices of Affinion, Vertrue, and Webloyalty after receiving complaints from consumers that stated such practices were misleading and deceptive. The Report states that the consumers do not believe that they consented to such charges on the financial accounts. The Report also says that consumers were often unaware of such charges until they reviewed their financial account statements and spotted charges they did not recognize.
The Senate Committee on Commerce, Science, and Transportation released a Staff Report for Chairman John D. (Jay) Rockefeller IV (D-WV) dated November 16, 2009 addressing aggressive sales tactics on the Internet and their impact on American consumers (“Report”). The release of the Report coincides with a hearing held by the Senate Commerce Committee on November 17th covering the same topic.
The Report, which was prepared by the Office of Oversight and Investigations Majority Staff, provides an overview of an investigation that Chairman Rockefeller instituted in May 2009 against three direct marketing companies (Affinion, Vertrue, and Webloyalty) engaged in e-commerce practices that had resulted in consumer complaints. The Report states that while the investigation is not complete, staff has concluded that the companies have been engaged in highly aggressive sales tactics that have resulted in millions of consumers being charged for services they neither wanted nor understood that they had purchased. The Report explains that such tactics involve providing consumers with unfamiliar services from unfamiliar companies while consumers are in the middle of purchasing services from sites that the consumers trust. A brief summary of the Report follows below.
Key Findings from the Investigation
While the investigation has yet to conclude, the Report states that the staff has made the following findings:
(1) Aggressive sales tactics to sell membership clubs to consumers who do not want them is a billion-dollar business;
(2) Well-known websites and online retailers use aggressive sales tactics and earn millions of dollars doing so;
(3) The three companies under investigation knowingly charged consumers for services they were unaware they had purchased;
(4) The customer service centers of the three companies under investigation primarily handle calls from consumers who are upset, confused, and/or would like to cancel their memberships; and
(5) Those companies conducting business online that have partnered with the three companies under investigation know that customers are harmed by such aggressive sales tactics.
Growth of E-commerce
The Report states that e-commerce has grown over the years into an important channel for commerce, and was responsible for over $60 billion of retail sales in the United States in the first part of 2009. The Report says that e-commerce has encouraged innovation over the Internet but has also led to aggressive sales tactics.
Sales Practices Migrating to Online
The Report explains that the companies under investigation have used such tactics in the offline context for years. Specifically, the Report notes that the companies enter into agreements with “reputable” online retailers, and in exchange for payments, sell memberships to consumers as they are in the process of purchasing other items from the retailers.
Consumer Expectations
The Report takes the position that offering such memberships during the checkout process exploits the expectations of consumers about how such checkout processes function. The Report explains that the “Yes” and “Continue” buttons mislead consumers into believing that they are completing a transaction with the online retailer with which they are familiar rather than entering into a new agreement with a different company.
Transfer of Consumer’s Billing Information to Third Parties for Ongoing Charges
The Report raises concern with the practice of the online retailers transferring consumer’s financial billing information automatically to the three companies under investigation. The Report states that the practice fails to provide consumers with sufficient notice that they are entering into new agreements that will result in monthly charges to their financial accounts.
Senate Commerce Committee Investigation
The Report explains that the Senate Commerce Committee instituted an investigation into the practices of Affinion, Vertrue, and Webloyalty after receiving complaints from consumers that stated such practices were misleading and deceptive. The Report states that the consumers do not believe that they consented to such charges on the financial accounts. The Report also says that consumers were often unaware of such charges until they reviewed their financial account statements and spotted charges they did not recognize.
