Rockefeller Ecommerce Scam Bill Heads to President's Desk
The House of Representatives has approved legislation that aims to stamp out an ecommerce scam that a handful of marketing firms allegedly used to bilk consumers out of more than a billion dollars, sending the measure to President Obama's desk for signing.
The Restore Online Shoppers' Confidence Act, introduced by Sen. John Rockefeller (D-W.V.) in May and passed by the Senate in November, easily cleared the House by a voice vote on Wednesday.
The measure would establish a set of restrictions on the activities of so-called post-transaction marketers, firms that partner with ecommerce websites to display offers after a shopper has completed a purchase. Last year, Rockefeller, who chairs the Senate Commerce Committee, led an investigation into three such marketing firms and their ecommerce partners, finding that they had duped consumers into registering for fee-based clubs that billed automatically each month, recurring fees that the committee found added up to $1.4 billion.
The companies in question, identified as Affinion, Vertrue and Webloyalty, were alleged to have partnered with well-known Internet merchants such as Blockbuster and Pizza Hut, who furnished them with customers' payment information, including credit card numbers. After a customer completed a transaction, a pop-up window would appear offering a rebate or a discount on a future purchase.
In the absence of obvious language identifying the company behind the offer, consumers assumed that it came from the merchant with whom they had initiated the purchase. But once they clicked through, they were unknowingly enrolled in a loyalty program run by the post-transaction marketers, which, with payment information in hand, began automatically billing the consumers, who would only become aware of the mysterious charges if they scrutinized their credit card bill or bank statement.
"This is a victory for American consumers. This legislation provides new standards that make sure businesses can't bill online shoppers for services they did not want to buy," Rockefeller said of the bill's passage in a statement. "It's not the way business should be done in America -- and now it will end. We're slamming the door on this billion-dollar scam.
The bill, expected to be signed into law shortly, would require post-transaction marketers to obtain express, informed consent from consumers before enrolling them in a fee-based program. They would also be mandated to provide a clear description of the product they are offering and to disclose that they are not affiliated with the initial merchant.
The bill includes in its threshold of expressed and informed consent the requirement that post-transaction marketers obtain consumers' full 16-digit account number before it enrolls them in a program, and prohibits ecommerce sites from passing along payment information.
It would also stipulate certain disclosure requirements about the terms of recurring fee-based programs, including the length of a trial period and instructions for cancelling membership
The bill would grant the Federal Trade Commission with the authority to enforce the provision of the legislation, and authorize states' attorneys general to sue for injunctive relief in federal court.
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