New York Attorney General Settles with Fandango and Investigates 22 Online Retailers for Linking Consumers to Discount Clubs

On January 27, 2010 the New York Attorney General announced that his office was investigating 22 popular online businesses that linked consumers to fee-based membership programs that charged "unauthorized" fees under the "guise" of discount offers. The NY AG's investigation is similar to the one that is being conducted by the United States Commerce Committee led by Senator Rockefeller. We previously reported on Commerce Committee's investigation back in November 2009 and January 2010.

The AG's investigation 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.

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,,,,,,,,, Budget,,, GMAC Mortgage,, Travelocity, Vistaprint, Intelius,, Expedia/, Columbia House, Pizza Hut and Gamestop/EB Games.


Fandango has agreed to permanently end the practice of sharing customers' credit and debit card information to discount program sellers. The Company will also implement reforms to protect online shoppers. 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

To learn more about our Marketing and Promotions practice, click here.

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