Marketers in credit card scandal start lobby effort

Webloyalty, Vertrue, and Affinion--under government scrutiny for their controversial marketing practices--are looking for help on Capitol Hill.

Greg Sandoval Former Staff writer
Greg Sandoval covers media and digital entertainment for CNET News. Based in New York, Sandoval is a former reporter for The Washington Post and the Los Angeles Times. E-mail Greg, or follow him on Twitter at @sandoCNET.
Greg Sandoval
3 min read

Representatives from some of the post-transaction marketing firms now under government scrutiny for allegedly duping consumers into signing up for membership programs are trying to whip up support on Capitol Hill.

According to my sources in Washington, D.C., some of the marketers have sent representatives to meet with individual lawmakers about taking up their side as the U.S. Senate commerce committee continues to investigate the practices of three firms: Webloyalty, Affinion, and Vertrue.

Webloyalty CEO Richard Fernandes during an interview on The Today Show. The Today Show

These companies, all based in Connecticut, are accused by Sen. John Rockefeller (D-W.V.), the committee's chairman, of misleading as many as 30 million people into joining their membership programs during visits at Buy.com, Orbitz, and other Web stores, and then locking them into paying monthly fees. In what has turned into a major e-commerce scandal, the government has alleged that one of the ways the marketers are able to get their hands on consumers' money is that they paid 88 well-known online merchants to hand over access to their customers' credit card information.

Under most of the agreements between the marketing firms and retailers, an advertising page is presented to a shopper while they complete a transaction at the retailer's online store. Many shoppers say they entered their e-mail address and pushed a large "Yes" button on the ad because it appears to be a $10 cash-back offer or coupon. Many of those who complain say they thought they were being rewarded by the retailer for making a purchase.

What appears to lull many shoppers into a false sense of security is the wide belief that a credit card owner is the only one who can use the card to complete an online transaction. Not so.

The actions of the marketers and their e-tailing partners were heavily criticized by members of the commerce committee during a November hearing on Capitol Hill. Since then, several notable merchants have stopped working with the marketing firms. They include VistaPrint, Continental Airlines, Priceline, and 1-800-Flowers, which just a couple of weeks announced it had cut ties with Affinion. Such companies banked millions of dollars from selling their customers' financial data.

But the marketers have gone on the offensive since then. Their representatives have told lawmakers and the public that they have been unjustly vilified, that they obey all applicable laws, and that they have modified their business practices--such as requiring consumers to enter the last four digits of their credit card number before they can be signed up to a program. Some e-commerce experts say these changes don't come close to solving the problem, though.

To help spread their message to the public, Affinion and Webloyalty have turned to Washington, D.C.-based public relations firms that specialize in so-called crisis management.

But what do these PR companies hope to achieve in a

To read more CNET stories about the scandal, click the photo.
climate that has seen hundreds of highly critical stories written about the marketers, as well as U.S. senators characterizing their practices as "theft" and a "scam"?

Who knows? What I do know is this issue hasn't been resolved. Nobody has passed any laws that prevent e-tailers from selling their customers' credit card data. Something else that should make consumers nervous: a second hearing that Rockefeller suggested he might hold has yet to be scheduled.

Note to Rockefeller: hold the hearing.

Those who have struggled to get their money back from these companies, such as Caroline Butler and her daughter JoAnna, deserve to see the CEOs of Webloyalty, Vertrue, and Affinion (respectively Richard Fernandes, Gary Johnson and Nathaniel Lipman), hauled into the Senate to answer questions about their methods.

And don't stop there. While you're at it, call United Online CEO Mark Goldston, Orbitz CEO Barney Harford, and any of the other merchants accused of selling out their customers. These executive are accused of breaking faith with customers in a serious way.

If it sounds like I want to snatch the rights of these Web marketers to appeal to their elected officials, that's not my intention. The companies have the resources and the right to do that. They also have the resources and the right to try to sway public perception.

But what Rockefeller and his committee must ask themselves is how many of the consumers who the government claims were misled by Affinion, Webloyalty, and Vertrue possess similar resources.

Who lobbies on their behalf?

U.S. Senate commerce committee