Webloyalty.com, Fandango.com Sued for Coupon Click Fraud

Posted on by Chief Marketer Staff

A class-action lawsuit was filed last week against Webloyalty.com, Inc., a provider of technology-based affinity services, and Fandango, an e-commerce movie ticket company, claiming that the companies are ripping off unsuspecting consumers by charging them monthly membership fees after they make an online purchase.

Massachusetts resident Joe Kuefler filed the complaint in U.S. District Court for the District of Massachusetts on Sept. 11, claiming that Webloyalty is involved in a scheme that has affected thousands of consumers. The suit seeks a halt to the practice and compensation for consumers.

In the suit, Kuefler claims that after consumers make a purchase at one of 75 or more e-commerce partner sites—including movie tickets from Fandango.com—a pop-up window appears promising a $10 cash savings from the partner site for their next purchase. But, the lawsuit charges, when consumers click the window to redeem the offer, their personal information, including credit or debit card number, is automatically transferred to Webloyalty. Webloyalty then automatically bills consumers’ credit cards a $10 monthly fee for membership in its Reservation Rewards program on a 30-day trial basis.

Webloyalty then engages in a “bait and switch” tactic informing consumers via e-mail that they can only cancel their membership by contacting the company within 30 days or be charged the recurring monthly fee, the lawsuit states.

Webloyalty disputes the claims.

“The lawsuit is without merit and is frivolous and we plan to fight it,” said Webloyalty spokesperson Beth Kitchener.

Fandango also denied the charges.

“The allegations against Fandango are completely without merit. Beyond that, we can’t comment on the specifics, as there is pending litigation,” said Fandango spokesperson Harry Medved.

Court documents state that the reward program has no benefits. Instead, “Webloyalty retains the consumer payments and then pays its web retailer clients, such as…Fandango, a ‘per customer fee’ for each consumer who allegedly ‘signs up,’ resulting in substantial revenues for both Webloyalty and its clients,” the suit said.

The complaint also said, Webloyalty employees indicated that 99% of the calls to the company’s customer service representatives were complaints and requests for refunds from defrauded consumers. And “because the charge is small (either $9 or $10 per month) many…may not even be aware of the extent of defendant’s wrongdoing and the amount in controversy would be too small to justify the expense of litigation in state court.”

The lawsuit alleges violations of the Electronic Communications Privacy Act, unfair and deceptive acts and practices, unjust enrichment, invasion of privacy and civil theft.

“Individuals who purchase products through the Internet should be extremely wary about doing so in the future given that there are companies out there whose solitary goal is to cheat the American public,” Stuart A. Davidson, an attorney with Lerach Coughlin Stoia Geller Rudman & Robbins LLP, the Boca Raton, FL, law firm representing Kuefler said in a statement. “Incredibly, even reputable companies are involved with, and are aiding, Webloyalty in its illegal pursuit of our hard-earned money.”

Founded in 1999, Webloyalty was recently named the fastest-growing technology company in Connecticut by Deloitte’s Technology Fast 50 for Connecticut and the eight fastest-growing technology company in North America by Deloitte’s Technology Fast 500 programs. Norwalk, CT-based Webloyalty reported revenues of $55 million in 2003 and $110 million in 2005.

Last month, Webloyalty appointed Matt Gilbert as senior VP-business development, and member of the leadership team giving him the responsibility of adding to its client roster of more than 120 e-commerce and travel businesses. Over the summer, NASCAR tapped Webloyalty to expand its Official NASCAR Members Club loyalty program giving members access to discounts from more than 160,000 local and national shopping, dining, and entertainment establishments.

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