Class-Action Lawsuit Unfolding in Boston Against Webloyalty, Fandango, Priceline, and Various Web Retailers Alleges Widespread “Coupon Click Fraud”

12/19/07

Updated and corrected, December 21, 2007. For details on the revisions, click here.

It is every online shopper’s nightmare (that is, if you awake to know it has even happened). You’re at the computer buying movie tickets, flowers, or pet food and, after completing your purchase, an enticing pop-up comes on the screen offering a $10 rebate. You type in your e-mail address to take advantage of the offer and the next thing you know, wham! You just unwittingly transferred your credit card number to a company you’ve never heard of and enrolled yourself in a dubious “rewards” program charging you $10 per month in perpetuity.

Such is the scenario outlined in hundreds of pages of court documents filed in a sweeping class-action lawsuit against Norwalk, CT-based Webloyalty.com and online partners that include Fandango.com, Priceline.com, justflowers.com, and others that is slowly working its way to trial in the Federal District Court of Massachusetts in Boston.

A key phase of the legal battle, known as the discovery process, will start in earnest after the holidays but won’t likely be complete until late this spring. It requires Webloyalty to produce vast numbers of corporate documents, including e-mails and minutes from meetings, as well as to allow attorneys for the plaintiffs in the case to take testimony from company employees in legal depositions. The process could reveal some eye-opening details about Webloyalty’s online marketing practices and arrangements with an estimated 75 major online retailers.

No matter the outcome, the case is being watched closely in both legal and financial circles. Lawyers say the suit could help shape the way laws governing online transactions are interpreted and enforced. Investors note that Webloyalty’s type of business, known as part of the so-called “lead generation” field, is a tempting and profitable branch of e-commerce. But, they say, any revelations from the case about deceptive practices would certainly give many would-be investors pause.

Ben Edelman, an assistant professor at Harvard Business School who has served as an attorney and expert in litigation involving online advertising fraud, says the case is important because it addresses two key issues in online lead-generation practices. “First, is there any limit to what Webloyalty and others can put in the fine print? Second, might there be some practices that are so likely to deceive that they cannot be permitted, even if disclosed in the fine print.” On this last point, Edelman is focused on the way Webloyalty gets consumers’ credit card numbers without customers explicitly handing them over. “Usually consumers know they’re entering into a contract because a retailer requests a credit card number,” he says. “But Webloyalty implemented a remarkable alternative—getting users’ card numbers directly from other merchants, and beginning to charge users who never told Webloyalty their card numbers.”

The named plaintiff in the lawsuit, Joe Kuefler, a resident of Stow, Massachusetts, bought movie tickets from Fandango back in December 2005. He claims he was unknowingly enrolled in one of Webloyalty’s so-called rewards programs after clicking on a pop-up offer, later finding a recurring $10 charge on his credit card from “WLI Reservations Rewards.” Kuefler got his money back after complaining about the charge, but the lawsuit alleges that he never gave his credit card information to Webloyalty and didn’t realize he had subscribed.

The complaint alleges violations of the Electronic Communications Privacy Act, unfair and deceptive acts and practices, invasion of privacy, and civil theft. Since this is a class-action suit, Kuefler is, of course, not alone. His lawyers say that the more than 700 consumer complaints they have reviewed attest to the validity of their allegations. The Connecticut Better Business Bureau alone says it has fielded 1,048 complaints … Next Page »

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  • D Scott

    I purchased tickets through Fandango in Janauary 2009, my visa card has been charged $12.00 for the past 7 months to “ReservationRewards”. I called they said I signed up for a free movie ticket offer whihc I never received. Very deceptive and misleading business practices. I’d have more respect for them if they used a mask and gun to hold me up. I can only imagine how many people are being robbed by these creeps and don’t even know it. I hope somebody takes some sort of action against these guys.

  • http://SUPERSHUTTLE RICHARD CALHOUN

    SUPERSHUTTLE scammed me with this illegal action. I spoke with the General Manager at Supershuttle and she was very evasive. They share MY money. I wrote the CT Attoney General without results – guess they get a cut also.
    I hope this website (XECONOMY) does not scam my email address.
    Richard

  • Wade Roush

    Hello Xconomy readers:

    There is an update and resolution of sorts to this whole Webloyalty story now. A federal judge approved the settlement agreement in the class-action suit, and it went into effect this month. Consumers who belonged to any of Webloyalty’s discount programs between 2000 and 2008 are eligible for partial and in some cases full refunds for each program in which they were enrolled. And Webloyalty has agreed to a number of changes in the way it pitches its discount program.s See this new August 27, 2009 Xconomy story for all the details.

  • Amy

    Yet even after a suit they do the same thing! I was never offered any coupons or to sign up for any reward..I just find 12 bucks charged to my back account that made another check that would have cleared bounced…so this 12 bucks wound up costing me 82!!!!!..this law suit needs to be opened back up because apparently this company made enough to not even be bothered by the first!

  • Cheri

    I was scammed too, but got all of the money back. What I am looking for now is a list of the companies that they are partners with so I can discontinue doing any business with them. They are aware that this company is unethical and dishonest, yet they are still involved with them and no doubt sharing in the profits.

    Does anyone know where or how I can get this list other than reading millions of complaints to gather of the origin of the scam for each person?

    Thanks

  • roger s peterson

    I want in on this law suit. Supershuttle has the Reservation Rewards link. I never got any coupons and have been charged $12 per month all of 2009.

    Roger S Peterson
    916-624-1894
    Sacramento

  • Elaine A Rue

    Every month I go through my credit card bills and bank account charges. I don’t understand why consumers are not more aware of what is going on with their finances. Yes, I have been a user of reservation rewards, got my money back and did not click on any of there ads again. Consumers be more aware of what is going on with your accounts.

  • Steph

    Add me to the list of those who have been burned. 5 months of charges! I contacted the BBB and filed a complaint. They were very nice when I called them and said they’d refund my money but of course that is part of the scam! I just have this image of my grandpa or someone like him not realizing that his card is being charged when he can barely make ends meet to begin with. I don’t understand why they would be allowed to continue on with these deceptive practices. I will never order flowers online again and I, too would like a list of companies who do business with them so that I NEVER use them again.

    Elaine, you were a “user” of reservation rewards? Or you got your money back? Which one is it? Or do you work for them? Yeah we get it that we should be more aware but obviously the only way this company can get “members” is to trick them so stop defending them please. There’s a reason why they make the charges so small and that’s because they know people might miss them or it will take awhile. And there are a lot of elderly people who are prone to scams like this.

    Sorry but I didn’t realize it was ok for companies to share credit card information. And once I realized that this company was looking for extra information from me I cancelled out of the coupon they were offering me but apparently all it took was me clicking on the coupon which didn’t say anything about a monthly fee. Why would I pay $12 per month for a one time $10 coupon??? Gee, thanks for making it “easier” for me. If I ever encountered an employee of this company at a bar I would order a pitcher of beer just to dump it over their head. Now that might be worth $12.

    This is fraud, plain and simple and I plan on telling everyone I know about them and the companies they work with.

  • Dan

    Just realized I got scammed too. $120 I’ll be calling amex tomorrow to see how much I can get back.

  • http://movietickets.com Brandy Rossman

    I also was scammed and it looks like they have been doing this for years. Why is this not elegal. i purchased movie tickets from movieticket.com and was enrolled in this rewards program I had no Idea 12 dollers was being charged each month untill i called the number charging me it and asked some questions. These guys are theives so be carefull what you purchase on line and read everything. I would also like to be part of this class action suit…