Anyone who has done any kind of shopping online -- whether it's going through an e-tailer, buying movie tickets, or booking a last-minute getaway -- has probably run into loyalty-program pitches.
At the end of the checkout process, a "congratulations" ad will appear, promising an award in exchange for joining a program. The monthly fees are in fine print, and because users simply have to enter an email address, many have made the mistake of assuming that nothing is official until they hand over their credit card information.
The zinger, of course, is that the loyalty-program operators are in cahoots with the websites that just scored your credit card information for the transaction. The information is passed along, and consumers begin seeing mysterious monthly charges on their credit cards.
The feds have had enough. They're going after the three biggies -- Vertrue, Webloyalty, and Affinion -- that might have booked $1.4 billion in revenue through these ethically shady tactics.
As investors, the real concern here is the future of the companies that have played along. There are 88 companies that have pocketed at least $1 million apiece from the loyalty-program operators for the leads. A mind-boggling 19 of those have pocketed at least $10 million apiece.
The names of the participants, as revealed by CNET's Greg Sandoval, may shock you. Among the 19 biggest offenders are Shutterfly
United Online
This is problematic on two fronts. The first, of course, is that this is revenue that will clearly dry up once Congress mauls the loyalty programs to bits. The bigger problem, though, is that investors will question the ethics of these online merchants that have no problem handing over billing information in deceptive add-on deals.
I have thick skin. I know I'm going to get these lame ads whenever I hit up MovieTickets.com for multiplex seats. However, anyone who has been burned once -- or knows someone who has been scorched -- is going to boycott the bejeezus out of these sites.
These are hard times, I know. The siren song of easy incremental revenue is tricky to resist. However, there comes a point when an ethically iffy company betrays its customers for the sake of its shareholders, only to realize that it's only going to hurt its investors in the long run by selling out its clientele. Negative testimonials spread quickly in cyberspace these days.
Karma's coming back to haunt these companies. Oh, and karma's angry. How angry? Take our Motley Poll to tell us what you think.
