Court Revives Lawsuit Accusing Webloyalty Of Bilking Consumers

A federal appellate court has revived a lawsuit accusing Webloyalty of duping Web users into signing up for a paid membership program.

In a ruling issued Tuesday, a three-judge panel of the 9th Circuit Court of Appeals said that California resident Kevin Park could proceed with a class-action complaint alleging that Webloyalty violated a law regarding the transfer of electronic funds, as well as laws regarding unfair business practices.

The battle centered on allegations that Webloyalty used "data pass" marketing -- which occurs when online merchants forward consumers' credit card data to post-transaction companies that then enroll consumers in paid programs.

Park alleged that after he bought a gift certificate for his son from Gamestop.com in 2009, he saw an ad for a $10 coupon from the company. He alleged that he clicked through and entered his email address, without realizing that he was signing up for a paid Webloyalty program. Two years later, he realized Webloyalty had charged him $264, according to court documents.

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A trial judge dismissed Park's claims before trial, in part because Webloyalty presented documents appearing to show that it disclosed the terms of the membership program to Park before he enrolled in it.

Park appealed that ruling to the 9th Circuit. On Tuesday, that court sided with Park, ruling that the judge shouldn't have accepted Webloyalty's evidence before without giving Park the opportunity to challenge its authenticity and accuracy.

In 2010, Congress passed the "Restore Online Shoppers' Confidence Act," which imposed new restrictions on post-transaction marketers who offer Web users the chance to enroll in discount clubs immediately after making e-commerce purchases. Among other curbs, the measure prohibited post-transaction companies from charging consumers' credit cards unless the consumers re-enter their entire card numbers as well as their names and addresses. The bill also prohibited online retailers from disclosing consumers' credit card information to post-transaction companies.

That same year, Webloyalty agreed to pay $5.2 million to settle a New York state investigation into allegations that the company tricked users into registering for paid discount clubs. Five online retailers, including Orbitz and Shutterfly, also agreed to pay a total of more than $3 million.

Affinion, a former competitor, subsequently acquired Webloyalty. In 2013, Affinion agreed to pay $30 million to settle charges by attorneys general in 46 states.

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