What do online companies like Orbitz, Priceline and Travelocity have in common?
Nope, guess again.
All three have found themselves in the middle of complaints about dubious business practices. The behavior in question has recently been investigated by the Federal Trade Commission on behalf of boatloads of victimized consumers.
The scam here, refers to the practice of sharing or “passing” credit card information over to a third party at the end of a transaction without the knowledge or explicit consent of the buyer.
The retailers deny any wrongdoing.
The practice known as “Data Passing” or “Pre-Acquired Account Marketing” was the subject of a high profile, year-long investigation by the Senate Commerce Committee according to a June 22, 2010 article in the Washington Post.
According to published reports:
“In May 2009, Chairman Rockefeller launched an investigation into a set of controversial e-commerce business practices that have generated high volumes of consumer complaints. Since that time, Commerce Committee staff has been investigating three Connecticut-based direct marketing companies – Affinion, Vertrue, and Webloyalty – as well as the hundreds of online websites and retailers that partner with these three companies to sell club memberships to online shoppers. Although this investigation is not yet complete, it is clear at this point that these three companies use highly aggressive sales tactics to charge millions of American consumers for services the consumers do not want and do not understand they have purchased.”
Bob Sullivan from MSNBC.com also reported that the problem has triggered an astounding $ 1.4 billion in unauthorized charges onto the credit card bills of 30 million Americans.
Senate investigators revealed that this practice was used by over 450 e-commerce websites and retailers. Many of the names on the list are well-known and respected companies who got around existing data-privacy and banking rules by forming partnerships and joint ventures with third parties.
Credit card issuer Visa, has taken a stand and no longer allows merchants to use the so-called “Data-Pass Marketing” on their network.
Despite Visa’s policy and after more than $1 billion dollars in “aggressive and potentially deceptive” sales tactics, I think it would be fair to complain that the horse is already out of the barn.
The strength of the United States and its business model lies in an ability to engender trust based on the universal principles embodied in its constitution and value system. Our currency is backed by the “good faith and credit” of the government. The availability of consumer credit is based on this premise. Most people therefore assume that the credit giver or entrepreneur responsible for managing credit transactions is trustworthy. If and when this trust is violated, the system and business model self destructs. The question is what must we do to ensure that this does not happen? How can we proactively preserve the spirit and intention of our constitutional legacy. Can business ethics be mandated? No, so how do we inculcate meaningful values that prevent the system from deteriorating? http://www.InnovativeDealmaking.com