Posted on 18 November 2009
Senator Rockefeller released the results of an investigative report into “Aggressive Sales Tactics on the Internet and Their Impact on American Consumers” in advance of a hearing on the subject by the US Senate Committee on Commerce, Science, and Transportation.
The research examines “controversial e-commerce business practices that have generated high volumes of consumer complaints” and focused on sales tactics that “charge millions of American consumers for services the consumers do not want and do not understand they have purchased,” according to the Staff Report.
A controversial practice known as “post-transaction marketing” was at the center of the research into the e-commerce business practices.
TechCrunch offers context on how “post-transaction marketing” works (also see the senate committee report’s illustration of the steps involved in an “Aggressive ‘Post-Transaction’” sales):
Background: hundreds of well known ecommerce companies add post transaction marketing offers to consumers immediately after something is purchased on the site. Consumers are usually offered cash back if they just hit a confirmation button. But when they do, their credit card information is automatically passed through to a marketing company that signs them up for a credit card subscription to a package of useless services. The “rebate” is rarely paid.
The report reveals that numerous well-known e-commerce companies have earned millions of dollars through post-transaction marketing “scams”, including sellers such as 1800Flowers.com, Fandango, FTD, Orbitz, Priceline, Shutterfly, Buy.com, Barnes & Noble, Expedia, as well as many, many more.
The chart below, taken from the committee’s report, highlights a number of the companies that have received income from post-transaction marketing, along with an approximation of how much money they’ve received through the practice:
In the Staff Report summarizing the investigation’s findings, the committee writes,
Eighty-eight e-commerce companies have earned more than $1 million through using these tactics, including 19 that have made more than $10 million. Classmates.com has made more than $70 million using these controversial practices.
Senator Rockefeller issued a statement on the report, saying:
After six months, this Committee has found that the companies we are investigating have figured out very clever ways to manipulate consumers’ buying habits so they can make a quick buck. American consumers have been complaining for years about these misleading practices and asking for answers – and rightly so. Millions of Americans are getting hit with these mystery charges every month – we have to do all we can to protect the hard working families relying on us to look out for their wallets and well-being.
Get the full report and read the Press Release from the US Senate Committee on Commerce, Science, and Transportation here.
TechCrunch has additional reporting on the committee’s findings.
Read comments from customers about post-transaction marketing scams here.
The chart below, taken from the senate committee’s report, illustrates “Aggressive ‘Post-Transaction’ Sales Tactics in an Online Purchase”:
If you find it tough seeing the federal government bailing out our banking institutions, imagine seeing them consistently giving bailouts to behemoth corporations on the brink of collapse. Fortunately, that hasn't happened in America's history other than a couple of times, even though the criticism still persists in the first ever government bailout of a corporation: Giving loans to Chrysler to help pay off enormous debts. It was in early September of 1979 two months before the stressful Iran hostage crisis when Carter was temporarily riding high in popularity with the peace deal between Israel and Egypt and weeks away from signing the Camp David Accords. A visit one day to Congress by Chrysler CEO Lee Iacocca stunned everybody. Yes, he was begging the government to bail out his company or the famous car company would soon be bankrupt before the end of the year.
At issue was that they needed a governmental guarantee to pay off about $1.2 billion in debts that had built up in the company throughout that decade through lagging sales, despite strong ad campaigns. Thinking it would bring on a domino effect of financial Armageddon if Chrysler went down (and because we were going through an energy crisis already), the government listened and acquiesced, albeit with trepidation. After all, this was the first government bailout of a corporation in our country's history with no guarantees is was going to work, plus the consideration of solvency in corporations never being a sure thing.
And that's been the major criticism of the Chrysler Corporation Guarantee Act President Jimmy Carter signed later that December. Back then, it didn't hurt quite as badly to loan out $1.2 billion to a corporation as it would be now. Had things been the way they are now in America, our government probably would have refused to help Chrysler and write it off as a necessary sacrifice for the sake of keeping everybody else afloat. But, today, Chrysler still stands by the government action taken and keeps reminding us how they've become the leader in cars for the last 25 years–including being a possible leader in electric cars soon.
There has been some speculation, however, that Chrysler fudged facts about how much that government bailout worked for them back in 1979. In fact, there is definitive proof (see second source link) that they still were in a form of bankruptcy even after the bailout and used the government money to actually help give pay raises to the execs in the company and fired valuable workers in the process.
Those above realities were generally swept under the rug by much of the public and only on public record if you looked carefully for it. However, that didn't stop Chrysler from gloating about what the government did to get them back on track in the early 1980's. For those of you who were alive and breathing at the time, you likely remember seeing Lee Iacocca becoming a corporate hero to many and writing books on how to succeed in the corporate world…with the government's help. What he never mentioned in those success stories was that post-governmental bailout salary cutbacks he promised would take place in the company never really happened, and he and other executives at the company ended up getting paid more than they should have in the long run. All of that is painful to contemplate when the taxpayer had to foot the bill through much of the 80's and immediate shareholders in the company loaded their wallets in the process.
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I know, we probably shouldn't be surprised that a corporation pulled a fast one on the public, even though it was necessary to keep the economy afloat. It's certainly possible now that we'll see more corporate bailouts down the road if (at the time of this writing) a $700 billion financial bailout bill doesn't pass in Congress. Chances are that the humungous plan to save our banking institutions will help the CEO's of companies in some way anyway as a necessary evil. Also, if corporate welfare continues under a McCain Administration, you can also expect people to get duped into supporting the bailout of another corporation.
Despite the disturbing realities of how most government bailouts work in who truly benefits, Chrysler ultimately did rise to the top and will, ironically, ultimately help our economy if they succeed at their new line of electric cars. In their new and ambitious electric car line that'll be released in the early part of this coming decade, you'll be able to buy different models that should also please the soccer moms of the world when you consider one of them will be an electric SUV. For those who shudder thinking that environmentally-friendly cars have to be the size of a miniature clown car, Chrysler will change the thinking on all of that.
With Chrysler actually helping us, perhaps we'll have to put a deep philosophical spin on the circuitous path this country takes in creating symbiotic situations in our economical health. Back in 1979, Americans paid out extra taxes to save the butts of Chrysler's CEO's, and now the children of those who paid out may finally reap the benefits of it thirty years later by being able to buy fuel-efficient vehicles that'll save us a boatload of money.
We'll have to keep that in mind when we keep hearing we'll get money back from our big emergency financial governmental bailout plan once it finally passes. You'll get many say, however, that the 1979 Chrysler bailout fleeced most average taxpayers so much that the money made back on the fuel-efficient cars won't pay it all back, even over thirty years time.
We may have to cross that bridge yet again and deal with the feeling of being fleeced when we see a corporate CEO sitting on a Congressional dais and pulling his chair up to the microphone with the face of a puppy begging for food…
Sources:
http://www.nytimes.com/2008/09/24/business/24auto.html?_r=1&ref=us&oref=slogin
http://www.heritage.org/Research/Regulation/bg276.cfm