The Subscription Trap

Some Partners Cut Ties

The vast majority of retail Websites I interviewed that work with Affinion, Vertrue, and Webloyalty say that they work hard to build a positive relationship with customers and don't want to tarnish it through deceptive practices. But since the Senate Commerce Committee investigation began, only 8 of the estimated 450 companies that partner with the Big Three--Air Tran Airways, Continental Airlines, Fandango, Intelius, 1-800Flowers.com, Priceline.com, US Airways, and Vistaprint--have publicly announced that they will no longer allow companies to make misleading pitches during the checkout process on their Websites.

Both 1-800Flowers and US Airways say that they won't be renewing their contracts with Webloyalty. Priceline and Vistaprints say that they will no longer work with Affinion. Intelius says that it no longer works with Vertrue.

Both Allposters.com and MovieTickets.com continue to offer pitches for club memberships on their sites. MovieTickets.com dangles a "$20 cash back incentive" in exchange for trying Webloyalty's Reservation Rewards program (which offers dining and travel discounts). AllPosters.com plays up a $15 coupon in exchange for trying membership in Webloyalty's Shopper Discount and Rewards club. Both sites ask you to enter your credit card information a second time to acknowledge that you are joining a club, and both explicitly warn that you'll be charged if you don't cancel your membership within 30 days.

Money-Go-Round

Spokespeople for a number of companies told me that they don't believe posttransaction marketing confuses or entraps their customers, but Rockefeller says that the results of his committee's investigation show otherwise. "The interviews and the e-mail communications provide abundant evidence that the e-commerce partners are aware that their customers are being misled by the enrollment offers from Affinion, Vertrue, and Webloyalty," the committee's report states.

Even more scathing is a study that the Senate investigation unearthed from Webloyalty as part of a subpoena for information. According to internal company documents, Webloyalty surveyed 243 of its Reservation Rewards members and found that 76 percent of them either didn't recall being offered a Reservation Reward membership or said that they had declined a membership offer. The survey was conducted before Webloyalty began asking customers to enter their credit card data a second time to sign up for its programs.

The commerce committee report also included an e-mail message in which a Vertrue employee estimated that "cancellation calls represent approximately 98 per cent of call volume" to the company's customer service center.

A review by the Better Business Bureau of numerous complaints against these companies indicates that many consumers charged for club membership said they were unaware they had given these companies their billing information.

Financial information that the companies provided to the Senate Commerce Committee reveals that the Big Three (Affinion, Vertrue, and Webloyalty) and their e-commerce partners have generated more than $1.4 billion in revenue over the past 10 years from Internet consumers who have been charged for membership programs. Of the $1.4 billion in total revenue, $792 million went to the e-commerce retailers.

My review of the posttransaction marketing companies' financial information indicates that their revenues may have been considerably higher. For instance, Webloyalty reported revenue of $193 million in 2007 alone, according to the most recent numbers available; and in that same year, Vertrue announced that it was projecting revenue of $800 million. For its part, for the third quarter of 2009, Affinion reported in excess of $184 million in revenue from its Membership Products segment. Those numbers suggest that combined revenue for the three firms may now be close to $1 billion a year.

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