So since scouring the entire 35 pages of Senate Oversight may be a little too much of a commitment, I read (and re-read) the entire document, which bytheway is entitled
AGGRESSIVE SALES TACTICS ON THE INTERNET AND THEIR IMPACT ON AMERICAN CONSUMERS
Here is the link (http://commerce.senate.gov/public/_files/111609STAFFREPORT.pdf), but below that are the snippets that even in this day & age still blow my mind:
***Affinion, Vertrue, and Webloyalty – the three leading companies engaged in the aggressive online sales tactics described above – are all located in or around Norwalk, Connecticut. All three companies are managed by executives who started their careers at Comp-U-Card (CUC), a Connecticut company that pioneered the marketing of discount membership clubs.
***Affinion is a successor corporation to CUC which was started in 1973 and sold memberships to various auto, dining, shopping and travel discount clubs. In 1997, CUC merged with HFS Incorporated and the new company rebranded itself as Cendant. Shortly after the merger, Cendant announced that CUC had falsely inflated the number of club memberships it had sold, thereby overstating its 1995-97 earnings by at least half a billion dollars.23 A later investigation by the Securities and Exchange Commission determined that CUC had been filing false financial statements since 1985, and that the company‘s misstatement of its income ―was of historic proportions.‖24 CUC‘s founder and former chief executive, Walter A. Forbes, was criminally prosecuted and sentenced to more than 12 years in federal prison. CUC‘s former Vice Chairman, E. Kirk Shelton, was also prosecuted and sentenced to 10 years in federal prison. Both CUC executives were ordered to pay $3.2 billion in restitution.25
***In 2001, Cendant rebranded its membership club unit as ―Trilegiant and, in 2005, sold it to Apollo Management, a New York-based private-equity group, which in turn renamed the company Affinion.26 Trilegiant/Affinion has been the subject of numerous law enforcement actions and private lawsuits in connection with its aggressive marketing practices.
***In 1989, Gary Johnson, a former CUC vice president, founded Cardmember Publishing Company. In 1996, the company‘s shares began to be publicly traded under the name MemberWorks.31 In 2004, MemberWorks changed its name to Vertrue. Three years later, in 2007, Vertrue was de-listed and sold for approximately $800 million to a group of private equity investors led by One Equity Partners, the private equity arm of J.P. Morgan.32 Vertrue currently markets club memberships under the auspices of its subsidiary Adaptive Marketing, LLC.
***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 ―Ye 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
***consumers complain that they did not consent to sharing their billing information with a third party membership club. They also say they only learned they had been enrolled in one of these membership clubs after seeing a ―mystery charge‖ on their monthly credit card or checking account statement months after the purchase.
***Since 1999, Internet consumers have been enrolled more than 35 million times in Affinion, Vertrue, and Webloyalty‘s membership clubs.
***More than 450 e-commerce websites and retailers have partnered with Affinion, Vertrue, and Webloyalty to employ aggressive sales tactics against their online customers. Of the $1.4 billion in total revenue earned through using these tactics, $792 million of this total was earned by Affinion, Vertrue, and Webloyalty‘s e-commerce partners. Eighty-eight e-commerce companies have earned more than $1 million through using these tactics, including 19 that have made more than $10 million. Classmates.com has made more than $70 million using these controversial practices.
***To illustrate how this system works, if a company displayed the enrollment offer to one million visitors on its site every year, and 2% of its customers joined an Affinion, Vertrue, or Webloyalty club, the company would receive a payment of $850,000, according to the rates listed in the table. But if its conversion rate were a higher 5%, the company would receive $1.4 million. This sliding scale payment system gives retailers a strong financial incentive to allow Affinion, Vertrue, and Webloyalty to employ aggressive sales tactics that mislead customers but increase conversion rates. An important fact to keep in mind is that the revenue web retailers earn from their partnerships with Affinion, Vertrue, and Webloyalty has no associated costs for the web retailers and is therefore 100% profit.
***One Webloyalty employee candidly commented in an e-mail that, ―at least 90% of our members don‘t know anything about the membership.
***a Vertrue employee had estimated that ―cancellation calls represent approximately 98% of call volume.
***Thousands of customers have contacted the companies using words like ―fraud, ―tricked, ―deceptive, ―misleading ―scam,―deceitful ―dishonest, ―betrayed, and ―robbed to describe their experiences
***In December 2006, California and 15 other state attorneys general reached a $14.5 million settlement with the two companies
***The three companies‘ ―customer service operations are almost entirely dedicated to handling the large volume of calls from confused and angry consumers requesting cancellations, and asking how the company obtained their credit card information.
.***One of the documents Vertrue produced to the Committee, for example, is a summary of June 22, 2009, feedback from consumers who had visited one of its membership websites. Of the ―members who completed the survey, 43% indicated they were visiting ―to find about the charge on my credit card that I did not recognize and 44% indicated they were visiting ―to cancel the program. Only one member indicated he or she was there ―to find out more about my membership benefits and none of the respondents were there ―to obtain my member ID.
***A Disposition Report run in September 1, 2003, appears to show that, of the 66,922 members who cancelled their Reservation Rewards membership in August 2003, 77%, had indicated ―Did Not Authorize/Was Not Aware‖ as their reason for cancellation.
***As part of the survey, 308 past or current members of Reservation Rewards – half of whom were described as ―active‖ members – were asked a series of questions. Among the findings of the survey were the following:
234 of these members (76%) either did not recall being offered a Reservation Rewards membership or said they had declined a membership offer;
Only 62 of the members (20%) remembered receiving an e-mail notifying them of their Reservation Rewards membership;
Only 5 of the members (1.6%) said they had received a $10 cash back offer; and
Only 4 of the members (1.3%) said they had used Reservation Rewards discounts.
***In a training manual, Affinion has informed its newly hired call center representatives that during an ―8-hour shift they will take ―between 75-100 calls and that ―approximately 80% of these calls will be from members wishing to cancel their membership.
***Vertrue employees estimated that it received ―7 million customer calls per year and that ―cancellation calls represent approximately 98% of call volume.
***Another page in a Webloyalty manual offered a list of the ―Top Ten Reasons a Member Calls and offered ―Cancel my membership and ―What is this charge? as the top two reasons.70 Other Webloyalty manuals provided call center representatives with a process for handling members asking the questions: ―what is this charge? or ―who are you?
***of the 34,262,674 members who were promised automatic cash gifts or other incentives, only 3% actually received the promised enrollment benefit.
***A Site Usage table presented to the Webloyalty Board of Directors in March 2006 reported that between 70% and 80% of Reservation Rewards club ―members‖ enrolled through data pass had either never visited the Reservation Rewards site at all or viewed only the club‘s home page without ever accessing additional pages.
***In April 2004, the employee of a Webloyalty e-commerce partner, which operated a virtual shopping cart for Internet merchants, sent an e-mail to a Webloyalty employee stating the following:
…I do keep hearing the same thing from our merchants who are calling up wanting the program removed. They are telling us their shoppers are saying:
1) They have been tricked into buying and or signing up for something
2) They did not know there was a cost involved with the program
3) The cost was hidden at the bottom of the page, or not very clear
4) They do not know who to call to get more info, so they call the merchant (who gets ticked off, calls us and wants out of the program).
5) They do not know who is offering the program or who to contact so again they call the merchant (who gets ticked off, calls us and wants out of the program).
In short, continuity can not continue as such. Good luck to those of you that think other iterations will arise and your 'massive muniez' will continue.
--
Evan Lovett
310.498.1974
AGGRESSIVE SALES TACTICS ON THE INTERNET AND THEIR IMPACT ON AMERICAN CONSUMERS
Here is the link (http://commerce.senate.gov/public/_files/111609STAFFREPORT.pdf), but below that are the snippets that even in this day & age still blow my mind:
***Affinion, Vertrue, and Webloyalty – the three leading companies engaged in the aggressive online sales tactics described above – are all located in or around Norwalk, Connecticut. All three companies are managed by executives who started their careers at Comp-U-Card (CUC), a Connecticut company that pioneered the marketing of discount membership clubs.
***Affinion is a successor corporation to CUC which was started in 1973 and sold memberships to various auto, dining, shopping and travel discount clubs. In 1997, CUC merged with HFS Incorporated and the new company rebranded itself as Cendant. Shortly after the merger, Cendant announced that CUC had falsely inflated the number of club memberships it had sold, thereby overstating its 1995-97 earnings by at least half a billion dollars.23 A later investigation by the Securities and Exchange Commission determined that CUC had been filing false financial statements since 1985, and that the company‘s misstatement of its income ―was of historic proportions.‖24 CUC‘s founder and former chief executive, Walter A. Forbes, was criminally prosecuted and sentenced to more than 12 years in federal prison. CUC‘s former Vice Chairman, E. Kirk Shelton, was also prosecuted and sentenced to 10 years in federal prison. Both CUC executives were ordered to pay $3.2 billion in restitution.25
***In 2001, Cendant rebranded its membership club unit as ―Trilegiant and, in 2005, sold it to Apollo Management, a New York-based private-equity group, which in turn renamed the company Affinion.26 Trilegiant/Affinion has been the subject of numerous law enforcement actions and private lawsuits in connection with its aggressive marketing practices.
***In 1989, Gary Johnson, a former CUC vice president, founded Cardmember Publishing Company. In 1996, the company‘s shares began to be publicly traded under the name MemberWorks.31 In 2004, MemberWorks changed its name to Vertrue. Three years later, in 2007, Vertrue was de-listed and sold for approximately $800 million to a group of private equity investors led by One Equity Partners, the private equity arm of J.P. Morgan.32 Vertrue currently markets club memberships under the auspices of its subsidiary Adaptive Marketing, LLC.
***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 ―Ye 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
***consumers complain that they did not consent to sharing their billing information with a third party membership club. They also say they only learned they had been enrolled in one of these membership clubs after seeing a ―mystery charge‖ on their monthly credit card or checking account statement months after the purchase.
***Since 1999, Internet consumers have been enrolled more than 35 million times in Affinion, Vertrue, and Webloyalty‘s membership clubs.
***More than 450 e-commerce websites and retailers have partnered with Affinion, Vertrue, and Webloyalty to employ aggressive sales tactics against their online customers. Of the $1.4 billion in total revenue earned through using these tactics, $792 million of this total was earned by Affinion, Vertrue, and Webloyalty‘s e-commerce partners. Eighty-eight e-commerce companies have earned more than $1 million through using these tactics, including 19 that have made more than $10 million. Classmates.com has made more than $70 million using these controversial practices.
***To illustrate how this system works, if a company displayed the enrollment offer to one million visitors on its site every year, and 2% of its customers joined an Affinion, Vertrue, or Webloyalty club, the company would receive a payment of $850,000, according to the rates listed in the table. But if its conversion rate were a higher 5%, the company would receive $1.4 million. This sliding scale payment system gives retailers a strong financial incentive to allow Affinion, Vertrue, and Webloyalty to employ aggressive sales tactics that mislead customers but increase conversion rates. An important fact to keep in mind is that the revenue web retailers earn from their partnerships with Affinion, Vertrue, and Webloyalty has no associated costs for the web retailers and is therefore 100% profit.
***One Webloyalty employee candidly commented in an e-mail that, ―at least 90% of our members don‘t know anything about the membership.
***a Vertrue employee had estimated that ―cancellation calls represent approximately 98% of call volume.
***Thousands of customers have contacted the companies using words like ―fraud, ―tricked, ―deceptive, ―misleading ―scam,―deceitful ―dishonest, ―betrayed, and ―robbed to describe their experiences
***In December 2006, California and 15 other state attorneys general reached a $14.5 million settlement with the two companies
***The three companies‘ ―customer service operations are almost entirely dedicated to handling the large volume of calls from confused and angry consumers requesting cancellations, and asking how the company obtained their credit card information.
.***One of the documents Vertrue produced to the Committee, for example, is a summary of June 22, 2009, feedback from consumers who had visited one of its membership websites. Of the ―members who completed the survey, 43% indicated they were visiting ―to find about the charge on my credit card that I did not recognize and 44% indicated they were visiting ―to cancel the program. Only one member indicated he or she was there ―to find out more about my membership benefits and none of the respondents were there ―to obtain my member ID.
***A Disposition Report run in September 1, 2003, appears to show that, of the 66,922 members who cancelled their Reservation Rewards membership in August 2003, 77%, had indicated ―Did Not Authorize/Was Not Aware‖ as their reason for cancellation.
***As part of the survey, 308 past or current members of Reservation Rewards – half of whom were described as ―active‖ members – were asked a series of questions. Among the findings of the survey were the following:
234 of these members (76%) either did not recall being offered a Reservation Rewards membership or said they had declined a membership offer;
Only 62 of the members (20%) remembered receiving an e-mail notifying them of their Reservation Rewards membership;
Only 5 of the members (1.6%) said they had received a $10 cash back offer; and
Only 4 of the members (1.3%) said they had used Reservation Rewards discounts.
***In a training manual, Affinion has informed its newly hired call center representatives that during an ―8-hour shift they will take ―between 75-100 calls and that ―approximately 80% of these calls will be from members wishing to cancel their membership.
***Vertrue employees estimated that it received ―7 million customer calls per year and that ―cancellation calls represent approximately 98% of call volume.
***Another page in a Webloyalty manual offered a list of the ―Top Ten Reasons a Member Calls and offered ―Cancel my membership and ―What is this charge? as the top two reasons.70 Other Webloyalty manuals provided call center representatives with a process for handling members asking the questions: ―what is this charge? or ―who are you?
***of the 34,262,674 members who were promised automatic cash gifts or other incentives, only 3% actually received the promised enrollment benefit.
***A Site Usage table presented to the Webloyalty Board of Directors in March 2006 reported that between 70% and 80% of Reservation Rewards club ―members‖ enrolled through data pass had either never visited the Reservation Rewards site at all or viewed only the club‘s home page without ever accessing additional pages.
***In April 2004, the employee of a Webloyalty e-commerce partner, which operated a virtual shopping cart for Internet merchants, sent an e-mail to a Webloyalty employee stating the following:
…I do keep hearing the same thing from our merchants who are calling up wanting the program removed. They are telling us their shoppers are saying:
1) They have been tricked into buying and or signing up for something
2) They did not know there was a cost involved with the program
3) The cost was hidden at the bottom of the page, or not very clear
4) They do not know who to call to get more info, so they call the merchant (who gets ticked off, calls us and wants out of the program).
5) They do not know who is offering the program or who to contact so again they call the merchant (who gets ticked off, calls us and wants out of the program).
In short, continuity can not continue as such. Good luck to those of you that think other iterations will arise and your 'massive muniez' will continue.
--
Evan Lovett
310.498.1974
