Fandango Press Release

CUOMO INVESTIGATING 22 POPULAR ONLINE RETAILERS FOR LINKING CONSUMERS TO DISCOUNT CLUBS THAT CHARGE HIDDEN FEES

Cuomo forges groundbreaking agreement with Fandango to protect online shoppers from hidden charges; Company to permanently stop passing customers' information to discount club sellers

[En Español]

NEW YORK, N.Y. (January 27, 2010) - Attorney General Andrew M. Cuomo today announced his office is investigating 22 popular online businesses that deceptively link unsuspecting consumers to fee-based membership programs that charge unauthorized fees under the guise of discount offers. His office has also reached an agreement with online movie ticket retailer Fandango to end similar practices.

Cuomo’s investigation has found that when consumers shop online from familiar retailers, they are often presented with a discount or cash-back incentive offer as they complete their purchase. When consumers click on the discount or incentive banner, they are unknowingly directed to a membership program seller’s Web page that is separate from the online retailer’s site. The consumer is then instructed through large, colorful print and voice prompts to accept the discount or incentive. Information about joining the membership program and its ramifications, including the fact that the consumer is agreeing to transfer his or her credit or debit card account information, is buried in fine print and cluttered text. Small and recurring charges then begin to appear on consumers’ credit or debit card bills from unfamiliar companies. Because of the low dollar amount, the charges may go unnoticed for some time.

“This online scheme has impacted the finances and tried the patience of tens of millions of consumers nationwide. Well-known companies are tricking customers into accepting offers from third party vendors, which then siphon money from consumers’ accounts,” said Attorney General Cuomo. “I commend Fandango for doing the right thing by ending the practice of sharing consumers’ financial information with these discount club sellers. I expect the other businesses to follow Fandango’s lead and adopt these reforms to protect consumers who shop online.”

Cuomo has sent subpoenas to 22 well-known merchants that have deals with the three major companies that offer these discount programs: Webloyalty, Affinion/Trilegiant and Vertrue. The subpoenas seek information about retailers’ practices of sharing consumers’ account information with membership program companies; their knowledge of any deceptive solicitations; and compensation from the membership companies. The merchants being investigated include: Barnes & Noble, Orbitz.com, Buy.com, Ticketmaster.com, MovieTickets.com, FTD.com, Shutterfly.com, 1-800Flowers.com, Avon.com, Budget, Staples.com, Priceline.com, GMAC Mortgage, Classmates.com, Travelocity, Vistaprint, Intelius, Hotwire.com, Expedia/Hotels.com, Columbia House, Pizza Hut and Gamestop/EB Games.

Membership program companies enter into highly lucrative deals with the retailers and banks, which bring in millions of dollars in revenue when their customers click on deceptive incentives or become unknowingly enrolled. The three program sellers being investigated bring in revenues of more than $1 billion per year, much of which is amassed through fraud.

The scheme also takes place via postal mail: membership program sellers mail checks to consumers accompanied by solicitations branded with the name of the business or bank with which the consumer has transacted. Consumers frequently do not realize that by cashing these checks, they are enrolling in a membership program with a monthly fee because the solicitations often create the false impression that consumers are being provided with the check as a rebate or reward for their past business. The fact that consumers are enrolling in a fee-based program for which they will incur monthly charges is only inconspicuously disclosed above the endorsement line on the check.

The Attorney General’s Office has received numerous complaints from New Yorkers who have incurred unauthorized charges under these circumstances. Many consumers have reported that the companies offering membership programs make it difficult for consumers to cancel memberships and obtain full refunds of the unauthorized charges. At least one membership program company tries to limit refunds to a single month’s charges, even if a consumer has been subjected to months’ or even years’ worth of unauthorized charges.

Recently, Attorney General Cuomo’s Office intervened in a class-action lawsuit against Webloyalty to ensure that a settlement included full refunds to eligible customers who were scammed. Prior to the Attorney General’s intervention, the settlement limited refunds to only two months.

As part of an agreement with Attorney General Cuomo’s Office, online movie ticket retailer Fandango has agreed to permanently end the practice of sharing customers’ credit and debit card information to discount program sellers. It will also implement reforms to protect online shoppers from being deceived by discount and cash-back advertisements that appear on the company’s Web site. Fandango will suspend contracts with any discount program sellers while it implements these changes, and the company will pay $400,000 into a consumer redress fund. Fandango will also adopt the following reforms:

  • Review and approve all Fandango incentive offers made in connection with online purchases and require any contracted discount club seller to provide the numbers of New York customers enrolled and complaints received from those customers
  • Explicitly warn consumers that the incentive is offered for joining a separate company’s membership club
  • Explicitly notify consumers when they are redirected to a discount club seller’s site that they are leaving Fandango’s Web site
  • Ensure that all cash-back or rebate offers made by contracted membership club sellers comply with New York state rebate laws by providing redemption forms and information at the time of the offer

Stacey Olliff, Senior Vice President for Legal and Business Affairs for Fandango said, “Fandango is pleased to play a leadership role with the New York Attorney General to promote responsible marketing practices for the e-commerce industry related to online membership programs. We share the desire of Attorney General Cuomo to ensure that all consumers, and in particular Fandango customers, are fully informed and supported in their evaluation of and enrollment in online membership programs.”

Senator John D. (Jay) Rockefeller IV, Chairman of the U.S. Senate Committee on Commerce, Science, and Transportation, said, “I applaud Attorney General Cuomo and his investigators for holding e-commerce companies accountable for their conduct. Tricking online shoppers into signing up for worthless membership clubs is not right, and it is not ethical. With my Committee’s investigation in Washington and Attorney General Cuomo’s settlement, I hope that this type of Internet scam will soon be a thing of the past. I am pleased that our efforts are improving the consumer shopping experience on the Internet, but there is more work to be done to combat the misleading tactics companies are using online - and I have every intention of making sure further changes are made moving forward.”

Claire Rosenzweig, President and CEO from the Better Business Bureau of Metro NY said, “We applaud Attorney General Cuomo’s proactive steps to protect consumers. We stand behind efforts that improve the consumer and business relationship through transparency and disclosure. Consumer protections on the Internet, where identity theft and fraud has dramatically increased over the past two decades are critical. Building trust in the marketplace is key and the Attorney General’s investigation into these programs is a move in the right direction and we look forward to continuing our partnership with his office.”

University of Minnesota Law Professor Prentiss Cox said, “Retailers that sell their customers’ account information so that the customer can be charged for a membership club by stealth should know that they are participating in a marketplace scam. Data from public enforcement actions over the last ten years and from the recent U.S. Senate Commerce Committee investigation suggest that the number of consumers who know they are club members and know they are paying for this purported privilege range between about 0 percent and 5 percent. Every retailer and bank should be held responsible for selling their customers’ account information to other companies, especially when the deceptive results of this arrangement are so obvious.”

Consumers can minimize the chances of being victimized by carefully reading the fine print in connection with any discount or service offers, particularly when shopping online. Consumers also should not cash any unsolicited checks that they receive in the mail without reading any fine print that appears on the front or back of the check, as well as any materials that accompany the check. The Attorney General urges consumers to carefully review credit and debit account statements each month. Consumers who discover unauthorized charges on a credit or debit card account are urged to contact the Attorney General’s Office at 1-800-771-7755 or visit http://www.ag.ny.gov/.

The investigation is being handled by Assistant Attorney General Amy Schallop, Special Counsel Carolyn Fast, Assistant Attorneys General Jennifer Huber, Brian Montgomery and Harkiranjit Chahal of the Bureau of Consumer Frauds and Protection under the supervision of Bureau Chief Joy Feigenbaum.

sitemap Intergov foil PressOffice RegionalOffices SolicitorGeneral AppealsandOpinions ConvictionBureau CrimPros OCTF MFCU PublicIntegrityInvestigations TaxpayerProtection Antitrust ConsumerFrauds Internet InvestorProtectionRealEstateFinance CharitiesCivilRightsEnvironmentHealthCareLaborTobaccoCivilRecoveriesClaims Litigation RealPropertySOMB BudgetLegalRecruitmentHuman Resources Bureau