Yesterday morning, Wade wrote a story about the recent settlement agreement in a class-action lawsuit involving Connecticut-based Webloyalty, which runs various discount programs offered to consumers as they wrap up e-commerce transactions. The case involved allegations that Webloyalty violated state and federal laws by failing to disclose some details about its offerings, such as the monthly charges that showed up on credit card bills after customers agreed to the programs. In some cases, customers said they didn’t even know they had signed up for a program at all.

Now, it’s important to note that Webloyalty has not admitted any wrongdoing. It maintains, in fact, as Wade wrote (I’m quoting Wade here, not Webloyalty): “that the details about its charges have always been clear in the fine print and in the follow-up e-mails it sends to subscribers…”

Wade’s story has more details on the case and settlement. But I’d like to flag one point that has to do with changes Webloyalty has made in the way it markets its programs. The company was very helpful to us in our reporting and provided a fascinating graphic detailing those changes. I found the graphic extremely instructive about how marketing programs work and the way words and placements might influence outcomes and perceptions. I think you will, too.

You can find it here, or just click on the thumbnail image accompanying this story.

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Back in 2007, Xconomy ran a story by freelance contributor Seth Shulman about a class-action lawsuit unfolding against Norwalk, CT-based Webloyalty, an online marketing company. The comment section of that story became something of a clearinghouse for ongoing complaints against Webloyalty, which runs many of the discount programs pitched to consumers as they are finishing e-commerce transactions.

If you’ve ever bought a movie ticket online at Fandango or Movietickets.com and then been offered a $10 rebate, you might well have seen a Webloyalty offer. The problem—as scads of consumers alleged to Xconomy, the Connecticut Better Business Bureau, the New York Times, and other organizations—was that by accepting such rebate offers, many people unwittingly signed up for discount programs that carry a $10 monthly subscription price, fees that customers often didn’t notice on their credit card bills until months or years later.

Well, now there’s finally something for Webloyalty’s critics to be happy about. On June 30, a federal judge in Boston approved a settlement agreement in a class-action lawsuit alleging that Webloyalty broke state and federal laws by failing to disclose details such as the monthly charges. Webloyalty maintains that the details about its charges have always been clear in the fine print and in the follow-up e-mails it sends to subscribers, and it admitted no wrongdoing in the settlement. But under the terms of the settlement—which went into effect on August 14—the company agreed to change the way it markets its programs, and to partially or fully refund Webloyalty members for each program in which they were enrolled. (That includes programs known as Reservation Rewards, Shoppers Discounts & Rewards, Members Specials, Buyer Assurance, Distinctive Privileges, PC Protection Plus, Travel Values, Travel Values Plus, Classmates Rewards, and Wallet Shield.)

Up to 20 million people who joined Webloyalty’s programs between September 30, 2000, and September 30, 2008, will be eligible for the refunds, according to David George, a plaintiff’s attorney in the suit quoted in “The Haggler,” the New York Times’ consumer-protection column. If you’re one of these people, you can’t dally too long: members of the settlement class (meaning any U.S.-based Webloyalty subscriber who didn’t explicitly opt out of the settlement before May 29, 2009) must submit claim forms by January 11, 2010, to get their payments, according to this website created by Garden City Group, a Melville, NY, company that specializes in administering class-action settlements.

In comments to Xconomy, Beth Kitchener, Webloyalty’s vice president of corporate communications, said “we fully support the judge’s decision” to approve the settlement agreement. “Given that the settlement terms are consistent with our commitment to maintaining high standards in our marketing and customer service practices, we believed it to be in the best interests of our company, our clients and our members to resolve this matter and move forward,” Kitchener said.

It’s hard to gauge what material effect the settlement will ultimately have on Webloyalty. If all 20 million members of the settlement class were to apply for payments of $10 or $20, that could translate into a hit of $200 million to $400 million. But “the actual amount of payments is dependent on …Next Page »

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It’s not fun making mistakes. On Wednesday, we published a story about a class-action lawsuit being brought against Webloyalty, Fandango, Priceline, and others. We’re proud of our work on the piece and, as always, tried hard to get the story straight, but yesterday evening several potential inaccuracies were brought to our attention. We investigated further and found that we had indeed made errors on some of the details. To be clear, we stand behind the overall story, but we believe in owning up to our mistakes, so we’d like to set the record straight on the points we got wrong:

— Due to an editing error, we identified Petco.com as one of the defendants in the lawsuit. While Petco is among Webloyalty’s partners (several of whom are indeed named in the lawsuit), it is not a defendant in the case.

— Due to a miscommunication between the reporter and one of the attorneys in the lawsuit, the article incorrectly described the procedural posture of the case. Specifically, we reported that both a Webloyalty motion to dismiss the case and a Webloyalty motion for summary judgment had been denied by the court. In fact, Webloyalty did not make a motion to dismiss the lawsuit. It filed a motion for summary judgment at the outset that was terminated by the court without prejudice so the parties could take discovery. Webloyalty has the right to refile that motion.

We sincerely regret these errors and have corrected them. You can find the revised article here.

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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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