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By Baron & Budd Attorney Mazin Sbaiti
Ever seen mysterious charges on your credit or debit card statement? Baron & Budd recently filed Cox v. Clarus Marketing Group LLC, et al., 11-cv-0729, in San Francisco federal court. This is about an internet fraud that has generated millions of dollars of profits and affected innocent consumers nationwide.
The facts: Daniel Cox and Brad Barentson were each shopping online, and upon checkout, once they inputted their credit or debit card information, they were presented with a coupon for “free shipping” if they made later online purchases. They accepted the coupon by putting in their email address and zip code. But it turned out the “free shipping” wasn’t free at all. No. for the next several months, each man was being charged anywhere from $8 per month to $15 per month as part of a “membership” in a club they had never heard of, for products and services they never ordered. It turns out there are thousands of others similarly affected.
This is a species of online scam called “post-transaction marketing” which has been condemned by the United States Senate’s Committee on Commerce. One of the keys to the scam is that by requesting the “Free” offer like “free shipping,” the customer is not being asked to input their payment information again. They are told to enter their email and zip code to receive their “Free Offer” – and elsewhere it is disclosed that by doing so, the customer is agreeing to pay $15 per month for the membership program. Then, the customer payment information is sent by the website they were shopping on to the “program” manager, in this case, Freeshipping.com Clarus Marketing (who owns Freeshipping.com) debits the account without actually having the correct authorization from the customer. You see, by not asking for payment information again, the customer is never alerted to the fact that this is a brand new transaction, that they have just said “ok” to a rewards program they have never heard of, and is a lot more than just “clipping” an electronic coupon.
The scam violates several statutes and laws, including the Electronic Funds Transfer Act and the Electronic Communications Privacy Act, both federal laws, as well as state fraud, negligence, and consumer protection laws. The “Free Shipping” case is currently set up to become a class action upon certification.
Baron & Budd is currently co-lead counsel in In re EasySaver Rewards Litigation, 09-CV-02094 pending in federal court in San Diego, and which attacks a similar practice perpetrated by Encore Marketing Group through its “EasySaver Rewards” program.