If you shop online – and surveys show more than half of Americans do – chances are you've seen a "special offer" flash on the screen after you finished a transaction.
"A special thank you with your purchase," one might read.
Or, "Click here to get $10.00 cash back!"
Or, "Participate in the free trial and receive a free $25 gift card!"
For Linda Lindquist of Sussex, Wis., the e-offers usually seem too good to be true. But after making a purchase on the Web site Movietickets.com in July 2007, she encountered a deal that was particularly tempting.
"On the confirmation page was a coupon stating, 'Get $10 off your next purchase.' So, I clicked on the coupon because it seemed that it was a legitimate offer from Movietickets.com and I thought they were a reputable website," Lindquist told a Senate panel investigating online marketing tactics.
Little did she know, Lindquist had consented to a paid, monthly subscription to a "coupons and discounts" membership club run by a company independent of Movietickets.com.
Months later, Lindquist said, she discovered that she had unknowingly paid over $320 before catching the charges on her credit card bill and calling a customer service number for the program to complain.
"I told the representative that I had not knowingly signed up for the service and asked how they had gotten my credit card number," she said. "[The representative] stated that Movietickets.com gave them my credit card number."
Experts say the practice by familiar online retailers of automatically passing consumers' credit or debit card information to a third-party marketing firm is a relatively new and growing business practice in e-commerce. They say it often leads customers unwittingly down the path of buying something they don't want -- or even know they're getting.
The tactics have led to thousands of angry complaints from customers, scathing critiques by consumer advocates, and class action litigation.
Now, the controversial business practice has become the target of an investigation by the Senate Committee on Commerce, Science and Transportation. The committee held hearings on the matter today and is considering legislation to regulate the practice.
"For many Americans, shopping online is as familiar as shopping for milk," said committee chairman Sen. John D. Rockefeller, D.-W.Va. "But what's happening is that many online merchants have decided to betray their customers' trust. For a few extra bucks and profits, they pass their customers' billing information on to mysterious companies with histories of misleading practices."
A preliminary report issued by the Senate Commerce Committee identifies three Connecticut-based direct marketing companies – Affinion, Vertrue and Webloyalty – who partner with hundreds of websites and online retailers in what has become a billion-dollar business of selling club memberships to shoppers in exchange for "bounties" and other payments.
Committee investigators estimate more than 35 million consumers have joined membership clubs through Affinion, Vertrue and Webloyalty since 1999.
"The sales tactics used by these three companies exploit consumers' expectations about the online 'checkout' process," the report says. They are "harming large numbers of American consumers" and "may be negatively affecting consumers' overall attitude towards online commerce."