Today, the U.S. Senate Committee on Commerce, Science, and Transportation will hold a hearing, “Aggressive Sales Tactics on the Internet and Their Impact on American Consumers.” In May, Senate Commerce Chairman Rockefeller announced an “investigation into certain e-commerce marketing practices that generate thousands of mysterious monthly charges to consumer credit cards.” The Congressional Staff Report (pdf) accompanying the hearing explains why this is important and affects consumer privacy:

The rapid growth of e-commerce has promoted business innovation, but it has also attracted direct marketing businesses that use aggressive sales tactics against online shoppers. These tactics involve selling unfamiliar membership programs to consumers who are in the process of purchasing familiar products offered by trusted websites. Many of these controversial practices are new to e-commerce, but are well-known in other commercial channels, especially in direct mail and telemarketing, and have been the subject of numerous legal actions. The three direct marketing companies that are the subject of this investigation – Affinion, Vertrue, and Webloyalty – are all operated by management teams that have years of experience in employing these aggressive sales tactics against consumers.

The three companies gain access to online consumers by entering into financial agreements with reputable online websites and retailers. In exchange for “bounties” and other payments, reputable on-line retailers agree to let Affinion, Vertrue, and Webloyalty sell club memberships to consumers as they are in the process of buying movie tickets, plane tickets, or other online goods and services. The sales tactics used by these three companies exploit consumers‘ expectations about the online “checkout” process.

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 “Yes” 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 operated by Affinion, Vertrue, or Webloyalty.

For more about the consumer privacy and financial problems, read a May blog post from U.S. PIRG that explains the “click-to-ripoff” problem.

Hearing witnesses:
Mr. Ray France
St. Cloud, FL

Ms. Linda Lindquist
Sussex, WI

Professor Florencia Marotta-Wurgler
New York University School of Law

Professor Prentiss Cox
University of Minnesota Law School

Professor Robert Meyer
Wharton School
University of Pennsylvania

Date: Tuesday, November 17, 2009 at 2:30 p.m. ET
Location: Russell Senate Office Building, Room 253; Washington, D.C.
For more information: http://commerce.senate.gov/

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