How unscrupulous marketeers enticed by "easy money" became the subjects of a Senate investigation and the inspiration for proposed legislation that may change the way many Ecommerce companies conduct business.
A couple of years ago I was looking for a source of high-quality, short-run, offset printing. After checking out a few sites, I decided to try Vistaprint. The prices were good and I loved the way the whole process of uploading artwork and proofing was automated on their website. I was also amazed by the extent to which they took advantage of every opportunity to offer an up-sell, a cross-sell, or cross-promotion. (Not that I like being "nickel-and-dimed" by a barrage of pop-ups.) I didn't know anything about the company, but I liked their product and their service.
I have since learned that the company originated in Paris, France, and has a parent company, Venlo, in the Netherlands. They have a North American headquarters in Boston, manufacturing plants in Canada and the Netherlands, more offices in France and Spain, and customer support operations in Germany, Tunisia, and Jamaica. Vistaprint receives an average of 54,000 orders a day and reported $670 million in revenue for FY 2010. Vistaprint holds 26 U.S. patents, including several for browser-based tools for online product design.
Patent Litigation
In May 2007, Reuters reported that the company had filed patent infringement lawsuits against two Taylor Corporation subsidiaries, 123Print and DrawingBoard Printing, accusing them of infringing upon:
- U.S. Patent No. 6,247,011, "Computerized Prepress Authoring for Document Creation"
- U.S. Patent No. 6,631375, "Browser-Based Computerized Prepress"
- U.S. Patent No. 7,120,634, "Computerized Prepress"
Meanwhile, as reported by Adam Dewitz, in PrintCEO, a District Court in Düsseldorf found two German companies guilty of infringing upon another Vistaprint patent, European Patent 0 852 359, which describes a similar "computer-implemented method for generating prepress graphic files." That decision was later reversed on appeal.
By 2009 the tables had turned and Vistaprint (along with strategic partner OfficeMax) were accused by ColorQuick, LLC of infringing upon their U.S. Patent No. 6,839,149 which describes the "Preparation of production data for a print job using a still image proxy of a page description language image file."
Class Action Lawsuits
While all this was going on, Vistaprint and marketing partners Vertrue and Adaptive Marketing were hit with seven class action lawsuits filed in the states of Massachusetts, Alabama, Florida, Nevada, New Jersey, and Texas, accusing the companies of making unauthorized credit card charges in violation of the federal Electronic Fund Transfer Act and the federal Electronic Communications Privacy Act.
To simplify things, a United States Judicial Panel issued a Transfer Order to consolidate the actions under the jurisdiction of Texas, where the first motion was filed.
All actions share factual questions arising out of allegations that (1) the Adaptive defendants improperly enrolled VistaPrint customers in online membership programs, a practice referred to as "cramming:" and (2) this practice caused unauthorized charges to be made on customers' credit and debit accounts…
Senate Investigation
This coincided with an investigation by Senator John D. Rockefeller IV, Chairman of the Senate Committee on Commerce, Science, and Transportation into post-transaction pop-ups that result in unauthorized and hard to cancel, recurring monthly charges for unwary customers. The investigative committee specifically targeted three companies: Webloyalty, Affinion and Vertrue (aka Memberworks).
In a press release dated November 30, 2009, Vistaprint announced the end of all membership rewards programs and the termination of their relationship with Vertrue.
Vistaprint's termination of the Vertrue relationship and elimination of all membership program offerings is in line with the company's previously stated strategy. The company believes it is also appropriate at this time in light of the recent United States Senate Commerce Committee inquiry into a variety of membership rewards programs, including the sufficiency of their disclosures to consumers. Lawrence Gold, the company's general counsel, commented that "Vistaprint's website clearly disclosed the terms of the Vertrue membership programs previously offered to Vistaprint customers in conformity with all legal requirements, as the United States District Court for the Southern District of Texas ruled when it dismissed a purported class action lawsuit against a Vistaprint subsidiary and two Vertrue-related entities in August of this year."
Six months later, the U.S. Senate Commitee on Commerce, Science, & Transportation announced the results of the investigation in the press release, "Rockefeller Introduces Bill to Ban Misleading Internet Sales Practices Uncovered by E-Commerce Investigation," which said the companies in question (Webloyalty, Affinion and Vertrue) had used "aggressive sales tactics to enroll online consumers in services without their consent" and "developed policies designed to prevent online consumers from getting their money back when they called to question the mystery charges on their credit and debit cards."
The thirty-five page Staff Report for Chairman Rockefeller, "Aggressive Sales Tactics on the Internet and their Impact on American Consumers," states that the companies (Webloyalty, Affinion and Vertrue) had "bilked millions of Americans out of more than one billion dollars by partnering with hundreds of legitimate websites that were willing to share customer's billing information, including credit and debit card numbers, for financial gain."