Classmates.com Rakes It In With "Un-American" Internet Marketing Tactic, Charges Senate Committee

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And make sure to check your credit card bill after you do.
Bellevue-based Intelius isn't the only company raking it in from the dubious tactic known as "post-transaction marketing." A U.S. Senate committee report released in advance of a hearing held yesterday on "aggressive" Internet practices singles out Seattle's own Classmates.com as an egregious offender, having "made more than $70 million from these controversial practices."

The report, coming after a six-month investigation spearheaded by Senate Committee on Commerce, Science, and Transportation Chair John Rockefeller, doesn't specify Classmates' particular version of these practices. (As for its motivation, well, a fee-based service that connects you with old friends may not be quite as necessary in the age of Facebook, as the Onion pointed out.)

But the report documents the typical pattern: Consumers think they're buying one thing but are duped by confusing ads into recurring monthly fees for an additional service from partner companies that are allegedly the biggest offenders of all--Connecticut-based Vertrue, Affinion and Webloyalty.

While Classmates has apparently gotten the most profit out of this technique, the report notes that 18 other Internet companies--including Intelius and high-profile players like 1-800-Flowers.com, Travelocity and Shutterfly--have earned more than $10 million by doing the same. (See PDF of exhibit four.)

The Senate report doesn't pull any punches. These companies know what they're doing, it says. Internal documents and committee staff interviews accumulated over the past six months "provide abundant evidence that....customers are being misled."

Rockefeller was even more accusatory on a "Today" show interview that aired yesterday. "It's a shameful, outrageous, embarrassing, un-American tactic," he said.

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We tried to warn you...
Washington state Attorney General Rob McKenna also chimed in with a written statement for yesterday's hearing. "I cannot overstate the consumer injury that is occurring because of these marketing methods," he wrote. Intelius has already revealed in SEC documents that it is being investigated by McKenna. His statement alludes, however, to "companies"-- plural--that are under investigation and about which his office has turned up "an extraordinary amount of evidence" documenting their deliberate deception. His office declines to identify which other entities those are.

The hearing has already has an impact on Wall Street. Shares of Classmates' parent company, California-based United Online, dropped by 14 percent today.

 
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