Priceline shrinks from marketing scandal

Update: Dec. 15, 2009 7:50 a.m.: To include US Airways in list of companies that have stopped using post-transaction companies.

Priceline, an online travel site accused by the government of selling customer credit card information to "scam" marketers, says it no longer has any relationship with those marketing firms.

Company spokesman Brian Ek said Priceline, perhaps best known as the "name your price" company, stopped using post-transaction firm Affinion sometime last month. The news was first reported by The Connecticut Post.

In May, the U.S. Senate launched a probe of the company, as well as competitors Webloyalty and Vertrue and 88 online merchants, for allegedly duping as many as 30 million consumers into paying monthly fees.

"With the Senate inquiry going on, we want to wait and see what happens," said Ek, who added that Priceline no longer has partnerships with any of the post-transaction marketers.

According to the U.S. Senate Committee on Commerce, Science and Transportation, Priceline is one of about 19 companies, including Orbitz, Travelocity, Shutterfly, Classmates.com, Buy.com, and Redcats USA, that banked more than $10 million from its partnerships with post-transaction marketers. Among the merchants that have cut ties with the marketing firms since the government began its investigation are Continental Airlines and VistaPrint, an online printing service. On Tuesday, a spokeswoman for US Airways confirmed that the airline no longer was affiliated with post-transaction marketers.

The government says that the merchants agreed to allow the marketers to present ads late in the transaction process. According to experts, the ads are designed to give unwitting Web shoppers the impression that by providing their e-mail address they are justing signing up to receive a cash-back reward or discount.

But buried in the fine print are the full terms, which state that by providing an e-mail address, shoppers are enrolling in a membership program and authorizing the marketer to charge their credit card up to $20 per month. After finding the charges on their bank statements, thousands of mystified people have complained that they were misled.

The marketers have denied wrongdoing and say that their practices are legal because all the terms are included in their ads. They have recently begun requiring consumers to enter the last four digits of their credit card number.

That doesn't go far enough, according some experts. The government's investigators have unearthed documents that show the marketing companies and the e-tailers know that the ads are deceptive. They also show that only a tiny percentage of the people who are signed up to the membership programs ever use them and that an elaborate system is created by the marketers to shield their retail partners from getting blamed by customers.

Members of the Commerce committee have called the practices a "scam," and "robbery."

Just washing its hands of Affinion may not get Priceline off the hook. On November 5, Commerce committee Chairman John Rockefeller wrote a letter to Priceline CEO Jeff Boyd asking for information about his company's relationship with Affinion.

Ek said he didn't know whether Priceline severed ties with Affinion before or after Boyd received Rockefeller's letter.

The Commerce committee is expected to hold another hearing on the matter sometime after the start of the year.