Silicon Valley Watcher - Former FT journalist Tom Foremski reporting from the intersection of technology and media

The Dark Matter Of Internet Commerce - A Towering Pile of Scams - $1.4Bn And Counting...

Posted by Tom Foremski - November 23, 2009

I love the Pandora's Box that Mike Arrington from Techcrunch opened a few weeks back drawing attention to the mobile scams related to online social gaming.

It's difficult to assess how large that particular scam is but it must be in the hundreds of millions of dollars.

Over on ZDNet, Andrew Nusca writing for "Between the Lines" draws attention to another type of scam that has cost consumers more than $1.4 billion and sparked a US government investigation.

The retailers, including Priceline.com, Classmates.com, FTD.com, Shutterfly.com and Orbitz.com, were accused of working with marketers Affinion, Vertrue and Webloyalty to mislead consumers into unknowingly signing up for "affinity" or "loyalty" programs that would charge their credit card accounts.

What's repulsive about all of this is that the retailers are denying that they did anything wrong.

Greg Sandoval at CNET reports on the response from some of the companies:

Orbitz: "[The company] does not pass on any personally identifiable customer information to third party vendors without their permission."

United Online, parent company of FTD.com and Classmates.com: "We believe that our marketing practices provide clear disclosure. We do not transfer our customer's credit or debit card information to third parties without our customer's consent."

Priceline.com: The terms of the deal have "been clearly and fully explained."

While terms might have been posted, they were not posted clearly.

This is a ridiculous defense. The retailers are killing the golden goose. If people lose faith in online commerce then those companies will be the first ones to suffer.

It is estimated that 35 million people were caught in these scams. Why aren't these retailers standing up for their customers?!

And exactly how much of Internet commerce is tied up in scams of one kind or another? The acacia berry diets, the Obama government grants, etc.

And why aren't the big newspapers, New York Times, Washington Post, etc, digging into this story?

If you follow the money there are big names taking a cut all along the way from the Telcos, banks, credit card firms, Google, Facebook, and a host of promising startups -- not to mention some of the largest and prestigious VC firms and prominent angel investors.

It's a dark matter and a killer story that has yet to be told.

- - -

Please see:

Shocking: NYTimes Article On Virtual Goods Misses Huge Controversy

Zynga Credibility Evaporating - What's The Effect On Its Super Star VC Investors?

Analysis: The Business Opportunities From The Scam And Epidemic

Baby Boomer Cyber Horror movie: Your Inheritance Is In Nigeria...


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