On Monday the U.S. Senate Committee on Commerce, Science, and Transportation released a report summarizing its investigation into deceptive e-commerce business practices. The report highlights the growth of sleazy direct-marketing practices on the internet, particularly companies such as Affinion, Verture or Webloyalty. These companies, which have operated for years through direct mail and telemarketing, exploit consumers’ confusion about the online “checkout” process to sign consumers up for monthly payments in exchange for services that consumers may not want or understand. The report highlights two deceptive practices in particular: (i) “misleading ‘Yes’ and ‘Continue’ buttons that cause consumers to reasonably think they are completing the original transaction, rather than entering a new ongoing financial relationship” and (ii) the “data-pass” process whereby “direct-marketing companies receive automatic transfers of credit or debit card information from a familiar web seller to the third-party membership club.” After “agreeing” to enter into a relationship with direct marketers, consumers are typically charged $10-$20 per month until the consumer cancels the membership. According to the Senate Committee, thousands of online consumers have complained to their attorneys general about these deceptive and misleading practices.

Why would a reputable web commerce company enter into a partnership with a sleazy third-party membership club? The answer is that such partnerships are extremely profitable. Whereas typical internet advertising banners have CPMs (cost per thousand people who view the ad) around $30-$40, third-party membership clubs pay out CPMs of between $850 and $2,650, depending on conversion rates.

However, when reading the frustrated testimonials of customers who feel duped by these deceptive practices, one wonders whether it is truly in the best interest of e-commerce companies to allow third-parties the opportunity to deceive their customers.