eBay Vendors Named in Senate Exploitation Investigation

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AuctionBytes Blog
News and insight focusing on
ecommerce and the online auction industry
by Ina Steiner, Editor of AuctionBytes.com

November 18, 2009

eBay Vendors Named in Senate Exploitation Investigation

By: Ina Steiner

Wed Nov 18 2009 10:30:33

"American consumers shouldn't have to worry that their favorite websites are ripping them off during the checkout process," Chairman John D. Rockefeller said about programs such as WebLoyalty. The Senator launched an investigation into such programs, and released a list of ecommerce companies that participated in the programs. Among those named were eBay's Half.com site, eBay vendor ChannelAdvisor, as well as Buy.com and Tiger Direct.

I wrote about Marketworks' use of WebLoyalty in 2006 (ChannelAdvisor subsequently acquired Marketworks) and spoke to one of eBay's largest sellers at the time about his thoughts on participating in WebLoyalty despite consumer complaints.

eBay sellers were offering these programs on eBay's Third Party Checkout, so it would appear that buyers on eBay were also affected by these tactics. Did eBay do anything about the program after the AuctionBytes article ran? (And if not, could this become a problem for Meg Whitman, now running for governor of California?)

I have questions into eBay and eBay vendors today to learn more about who was (and is) offering such programs and what they think of the Senate investigation, stay tuned! Here's an excerpt from the Senate report:

KEY FINDINGS FROM THE INVESTIGATION:

Three Internet companies - Affinion, Vertrue, and Webloyalty - exploit consumers' expectations about online shopping to trick them into joining their membership clubs.

Consumers often do not know these companies have their credit card numbers until they start seeing charges on their bank statements.

Affinion, Vertrue, and Webloyalty and their e-commerce partners have earned over $1.4 billion in revenue with their misleading tactics.

There have been more than 30 million consumer enrollments in these clubs and several million people are unknowingly enrolled in these clubs at any one time.

More than 450 e-commerce websites and retailers have partnered with Affinion, Vertrue, and Webloyalty to employ aggressive sales tactics against their online customers splitting the revenue about 50-50.

Eighty-eight companies have made more than $1 million by partnering with Affinion, Vertrue, and Webloyalty, including Classmates.com, which made more than $70 million.

Source: Senate report

Interesting posts about the developments:

The Post Transaction Marketing Wall Of Shame: Hundreds Of Well Known Ecommerce Sites Rip Off Customers (Link)

Online merchant reward schemes… or "aggressive sales tactics"? (Link)

UPDATE 11/19/09: Here is a link to Thursday's AuctionBytes news article with a table of comments from eBay vendors.

Comments (23) | Leave Comment | Permalink

Readers Comments

eBay Vendors Named in Senate Exploitation Investigation

by: Brad LaPorte

Wed Nov 18 13:41:45 2009

Yeah I got scammed by this last year. Fortunately I used a CC that had a very low limit, and the charges were ultimately reversed. But it irritates the heck out of me that companies can get away with this.

eBay Vendors Named in Senate Exploitation Investigation

by: Prashant

Wed Nov 18 13:53:49 2009

This goes on more often than you think. Internet companies, especially those that are public or have accepted high amounts of VC are under extraordinary pressure to maximize their revenue. Whether it's acceptable is another questions - I suspect that these senate hearings are not the last we'll hear of this practice.

eBay Vendors Named in Senate Exploitation Investigation

by: Jeff

Wed Nov 18 14:30:27 2009

It is really possible to run a successfull business, being honest and straight-forward about your products and services. And, IMHO, WebLoyalty isn't honest and straight-forward about anything.

Marketworks turning on WebLoyalty for all new customers and required existing customers to opt out was one of the reasons we ultimately stopped using their service. For us that step pretty much identified the types of people we -were- (unfortunately) doing business with.

Now, I don't buy from business that "offer" WebLoyalty including eBay sellers that list with Channel Advisor.

eBay Vendors Named in Senate Exploitation Investigation

by: fruity

Wed Nov 18 15:42:35 2009

Ebays gonna get off on this with a kiss, because they'll sell you out. To save your souls, you better fink on ebay, pull out that collusion and arrangement stuff

I think this is also a great time to rat out the diamond sellers who are spamming us with their own marketing and terms. Ebay knows about it, they do nothing. Rat em all out

Its a beautiful day in the neighborhood

eBay Vendors Named in Senate Exploitation Investigation

by: Fruity

Wed Nov 18 16:25:37 2009

When my CC was used it was DIGITAL RIVER who did it. They are in luxembourg, they do 2 transactions at about 300 bucks each!

By the way, I called the subcommittee and they said it was the investigations team to talk with regarding scum practices on ecommerce. I talked w/a lady on the phone if you want you can call that investigations unit 202-224-1300 (public number)

Ebay better make damn sure those diamonds follow the ebay rules and not subject us anymore to those complicated legal agreement ssome of them like BUY have on their ebay listings link. its absolutely terrible that ebay would subject us when we buy to have to follow a totally different marketing agreement. all those big retailers have em, thats one of the reasons why it used to be good to buy on ebay, you weren't added on to something. Not anymore! Its all your fault ebay, I'm tellin

eBay Vendors Named in Senate Exploitation Investigation

by: fruity

Wed Nov 18 16:29:14 2009

btw, this also benefits ebay because then they can force a full paypal payment system. So dont underestimate ebays own protectionism.

eBay Vendors Named in Senate Exploitation Investigation

by: Book Em Dano

Wed Nov 18 21:09:50 2009

Glad to see that Channel Advisor was on the list. There is something about that Scott Wingo I have never trusted. Can you say know-it-all?

eBay Vendors Named in Senate Exploitation Investigation

by: fruity

Wed Nov 18 23:28:28 2009

You know I have to say this about ChannelAdvisor. I really doubt Scot was doing anything wrong. There's alot of sellers who sign up for cashback rewards and other types of loyalties. And there's nothing wrong so to speak of doing that. But I think that, in a way, if you have a company like Affinion, Vertrue, and Webloyalty who are marketing themselves as LEGIT, they were doing it in a way that made those retailers believe they were a legit company doing a legit practice (of giving consumers certain types of cashback awards). In a way, its no different than microsofts cash back awards program. Retailers signed up for that. Well what happens if in that example, MS is doing bad things? Then obviously the retailers take it on the chin. Know what I mean? Channel Advisor is a "service provider" so his company, out of all them on that list.. I think he's getting screwed on this one and I think its misdirected. The one thing that CA does do, is provide service, real good service

There's something about this report that I find strange. something about it seems deja vu and what ebay is going to do I think is going to be obvious.

But those diamond sellers better stop spamming. I be

eBay Vendors Named in Senate Exploitation Investigation

by: Pat

Thu Nov 19 09:17:48 2009

Fruity, did you read the statements from the companies in the main article Ina posted? Scott was the only one defending the practice. Others called it "scammy" or "unlawful". It's weird that you would defend someone whose intentions have always been highly dubious.

eBay Vendors Named in Senate Exploitation Investigation

by: Point of View

Thu Nov 19 10:17:27 2009

Oh come on already! Does anyone think a committee is going to lead to true justice and real punishment for these guys? They're part of the problem.

They'll make a big stink for a while, gasp at their heinous crimes, and fine them $1.2 million and send them on there merry way - then they can go spend the rest of that $994 million they've taken from unsuspecting victims. Capitalism - gotta love it!

It's just like the health care industry: Treat - Don't Cure. As long as you have an uninformed public who act like sheeple and depend on these health “dealers” for their happiness, they will continue to walk on you.

And the pharmaceutical companies who market directly to their customers via the media and unbearably long television commercials (half of which are spent telling you of their miracle drugs side effects).

They keep dangerous drugs on the market until they make enough moo-la from your suffering and then they go through the same process (once exposed by victims who refuse to be silenced with a pay-off).

A committee will investigate and the guv will gasp at their heinous crimes and they’ll be fined $250 million dollars (after 5-7 years).

Then they're shown the door to freedom and sent on their way - so they can go spend the rest of that $475 billion they made over the past 5 years on unsuspecting victims. Capitalism - gotta love it!

-jmo

eBay Vendors Named in Senate Exploitation Investigation

by: Ebay No More

Thu Nov 19 10:55:25 2009

Fruity on this one we have to disagree. Today it appears Scot looks more at the bottom line than he worries about his ethics. His blog just rehashs the same points and it's like he has run out of gas and insight. Maybe Ebay management put a muzzle on him with that partnership money he accepted. Don't know, don't care. This one is just tacky and the Scot of old wouldn't have gone anywhere near this type of sleazy business partnership.

eBay Vendors Named in Senate Exploitation Investigation

by: Moral Compass

Thu Nov 19 11:17:52 2009

Don't want to dogpile, Fruity, because I always enjoy your posts, but either you know what the right thing to do is, or you don't. From looking at Ina's chart, there are four other companies that had the same opportunity to use the same Web Loyalty program and didn't.

I'll give Scot credit though, at least he had the b@lls to answer the question, which is more than I can say for Half.com and Vendio. NO COMMENT? PUH-LEEEEZE!

eBay Vendors Named in Senate Exploitation Investigation

by: fruity

Thu Nov 19 13:02:18 2009

Pat, I posted on the 18th, do you really think I could of read the article Ina published on the 19th?

It's weird that a service provider would be listed there along side a list identified as retailers. Because a customer can't be affected via a channeladvisor checkout unless there is a retailer attached to it. A customer affected would be able to matching things up with a retailer. I dont get how a consumer would look to a service provider over a retailer as the culprit in this situation.. without naming a list of corresponding retailers. What, you think that's not a valid point? I brought up a valid point, yet you dont want to converse on that? Don't get all up on me because I'm putting thought behind what I'm saying and rag on me about an article that was published after I posted. I can be wrong, and I dont mind being corrected. But really, there's lots of ways you could of said it instead of some weak look at the article posted after you comment.

eBay Vendors Named in Senate Exploitation Investigation

by: fruity

Thu Nov 19 13:15:30 2009

ENoMore
I'll go read up on those articles but u know, it's a big strange that ebay is absent from this investigation. For me I'm questioning whether this congressional investigation team actually looked at where these transactions originated. Because it strikes me that just because a retailer has a dot com, some of these retailers have ebay IDs and this could of originated from ebay u know? I mean look at this, who stands to benefit the most from this? Ebay, so they can justify boarding up their checkout and not letting Google checkout get in. I'm just bothered by the fact that the documents dont show they ruled that out and that congress almost seems like they're supposed to not mention ebay in anything except for positive commentary.

And also, just to add it. Why isn't the media or the congress referencing that ebay is connected to half and CA? See.. bizarro in a way to me. Smells like something I've seen before

I agree there's something sleazy going on. I just dont know if maybe they're putting the stink far away from someone so we dont question how much ebay knows or is involved

eBay Vendors Named in Senate Exploitation Investigation

by: fruity

Thu Nov 19 13:23:36 2009

MoralC
It sounds like today there's more info to read and I could be very wrong and he's not getting screwed

I do think its troubling that we see a service provider being listed there and no corresponding CA seller clients being involved. Dont you think they (the retailer who uses CA) would of been contacted by the original victim/customer. That's a point isn't it? How come they're not posting anywhere? You'd think they would be ready to lynch him, right?

OK, I'm off to read and post

eBay Vendors Named in Senate Exploitation Investigation

by: Pat

Thu Nov 19 15:27:05 2009

Fruity, no offence intended. I didn't look at the timing of your post and Ina's article. It seemed weird in the context of Scott being the only one defending the practice.

eBay Vendors Named in Senate Exploitation Investigation

by: Cirrus B.

Thu Nov 19 15:43:53 2009

In my opinion Wingo is a wingnut. Mr. Data. I question his common sense. Is he still long on eBay? LOL

eBay Vendors Named in Senate Exploitation Investigation

by: Lawrence Dickerson

Thu Nov 19 16:05:12 2009

I want to thank Ms.Steiner for publishing this article and information.It just adds a couple more pieces of fuel to the woodpile regarding suspected eBay and affiliates in schemes that are less than ethical.

Point of View stated that this is a part of capitalism and the truth being that it definately is not as such.This is pure greed,deception and bordering on criminality.I think it is about time that the RICO statutes are applied to more internet operations.But I wonder how the PAC money flows into this everending slough.

eBay Vendors Named in Senate Exploitation Investigation

by: fruity

Thu Nov 19 23:03:36 2009

sorry too Pat. It was too early and I think I was just too cranky.

I went back and read the new article. And just from reading what he's saying, I think what he says sounds very ebayish. Almost like their we're just a venue speal

From what I understand WebLoyalty used some dirty tricks and that people have known about it for some time. Its unclear to me whether that is happening now still or not on channeladvisor checkouts.

That statement Ina put up from CA, appears to state that its for the sellers benefit. Well ummm did CA get that $1-$10 mil kick back or did the retailers who use his service get that? They don't sound like they are concerned about how it can impact the usage of the payment system for his clients. I wonder if he would take the same comatose response if this company was inserting spyware. Because I think its the same thing. There are lots of people who use his service who are not sophisticated with ecommerce and lean on his company. I mean they're not all high volume.

Another thing is he's not even remorseful. And you know Ebay could block his checkout if they wanted to. but then again, maybe there is something going on that we dont know.

I think I was wrong when I was said maybe he was getting the shaft. I think now maybe he's in a position he doesn't have to answer to know one. Maybe those clients should sue him, make him think a little bit harder on what he adverts to retailer customers. Maybe the customers who had to use CA checkout should sue him too

I do question whether these transactions originated from Ebay and if they did. I have a hard time believing ebay didn't know. But if they did, it would be to their best interest because they could justify even more locking down of checkout choices.

eBay Vendors Named in Senate Exploitation Investigation

by: fruity

Thu Nov 19 23:07:15 2009

Does anyone else notice that those who are using the loyalty things half.com, channeladvisor and vendio were both original competitors to ebay?
Scot had a different company, and Vendio used to be called Auctionwatch back in the day

Hooray to Auctiva for saying it like it is. He recognizes the impact on buyers.

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