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Social Networks The Almighty Buck The Courts Settles Lawsuit Over Phony Friends 127

Hugh Pickens writes "Techflash reports that has agreed to pay up to $9.5 million to its users to settle a lawsuit that accused the social network of sending deceptive emails that made people believe their old friends from high school were reaching out to connect — only to discover, after paying for a membership, that their long-lost buddies were nowhere to be found. Lawyers for the plaintiffs asserted that Classmates had 'profited tremendously from their false or deceptive e-mail subject lines and related marketing tactics.' Under terms of the proposed settlement, members who upgraded to premium memberships after receiving one of the 'guestbook' emails will be able to choose either a $3 cash payout or a $2 credit toward the future purchase or renewal of a membership. is also among companies that have come under scrutiny for their use of 'post-transaction marketing' tactics — in which customers are given additional offers as part of the online payment process, sometimes in such a way that they aren't aware they're also signing up to pay more. A November 2009 US Senate Committee report said Classmates made more than $70 million through its relationship with post-transaction marketing firms. The Classmates Media unit posted $58.8 million in operating profit for 2009, up more than 24 percent from the previous year, making Classmates 'the most profitable social network in the world,' according to CEO Mark Goldston."
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  • Is it just me? (Score:1, Interesting)

    by Anonymous Coward on Sunday March 14, 2010 @02:10PM (#31473374)

    Or are most of the better-known social networking sites run by scum? I can think of an exception or two, but they happen not to be profitable yet.

  • Similar experience (Score:5, Interesting)

    by johnw ( 3725 ) on Sunday March 14, 2010 @02:15PM (#31473402)

    I've experienced something very similar with a genealogy site in the UK. I signed up to have a look (in the course of which I gave them my name, date of birth and town of birth) and a little later I received an e-mail saying that I was probably in someone else's family tree - all the details which I'd given matched, plus they'd added the hospital in which I was born. It's a sufficiently small hospital that there couldn't have been two people with the same name born there on precisely the same day. And yet I know my family tree very well and there's no way the person purporting to have me in her tree could actually be related.

    Sure enough, when I tried to get more details they wouldn't give any details unless I paid, and then after I'd searched a few times the purported relative disappeared from their hits.

    The extra information is exactly what they could have got from the register of births marriages and deaths. It was enough to make me cancel my whole subscription.

  • (Score:5, Interesting)

    by bananaendian ( 928499 ) on Sunday March 14, 2010 @02:19PM (#31473438) Homepage Journal and other language learning websites run by Innovative Language Learning also practice similarly deceptive marketing.

    They offer a 'free trial', access for a month to their language learning website and then persuade you to give them your credit card details so that they can send you a 'free gift' (you only pay for the postage). However if you do this, you have just signed up to their subscription which will begin automatically charging your credit card and renewing your subscription every month ones the free trial is over. To opt-out you need to follow the websites instructions which tell you where to stop the renewal. However this only works after you have singed up again to one of their paid accounts, giving you access to the actual menu under which the opt-out is ... or you can just send their sales department an email and get the automatic subcription terminated.

  • Re:The Real Scam? (Score:2, Interesting)

    by Montezumaa ( 1674080 ) on Sunday March 14, 2010 @02:35PM (#31473542)

    This is the way capitalism and and open-and-free market works. If someone it selling a product, then you are free to purchase it. If the product is bad or does not work as promised, then you never use or purchase their product(s) again. Once enough people get the word out that a certain manufacturer or service company is not providing a proper product, then they end up losing their business because of lack of customer interest.

    It seems that is either providing a service that many people enjoy or they are doing some heavy black-market work to keep up their failing business(which is unlikely). Sure, there are some that were probably scammed through these emails(of which I got a few, but ignored), but it seems that there are more than a few people that like the service they are receiving. If continues to provide a faulty service, then their revenues will start to decline and the end of said service will come rather quickly.

    It is not up to the government to be your nanny or mother; you have to decide what is best for your money. Spread the word that is providing a bad service and "nature will take its course", so to speak.

  • by PingXao ( 153057 ) on Sunday March 14, 2010 @02:44PM (#31473630)

    There are many class action lawsuits that end up being complete BS like this one. The lawyers made a ton of money and the people scammed get $2. Not that classmates dot com deserves any sympathy whatsoever. IMO they should be forced out of business, because the only thing this will do is make them get even more "creative" with their advertising and spam.

    At the same time I haven't got a lot of sympathy by anyone taken in by the classmates scam. Darwin should be allowed to work his magic at some point. The first time I got spam from classmates dot com it took me exactly 2 seconds to evaluate the "service" and decide it was a bullshit operation.

    Having said all that, I wouldn't want to see class action lawsuits go away entirely. The laws that govern them do need an overhaul IMO.

  • Still doing it (Score:4, Interesting)

    by Plekto ( 1018050 ) on Sunday March 14, 2010 @02:48PM (#31473658)

    These lawsuits take months or years to grind through the courts and yet I had one of these pieces of spam just a couple of days ago from them. You'd think that they would at least stop the activity while they are being sued. But from the looks of it, they are going to pay the fine and continue doing it anyways as it's cheaper than stopping their illegal activity.

  • Re:The Real Scam? (Score:3, Interesting)

    by bmajik ( 96670 ) <> on Sunday March 14, 2010 @04:48PM (#31474448) Homepage Journal

    I agree that specialization in fraud investigation is a good thing.

    However, why do you conclude that this must be undertaken by government actors? You posit that NGO fraud detectors exist and are a good thing, but conclude that free-riders make government answers preferable.

    When comparing government vs. non-government actors, the government connotation means just a few things:
    - the government acts coercively
    - the government tends to forbid competiting actors in that space
    - the government has few or dubious performance metrics and oversight processes

    Private regulatory agencies are quite successful, except as they are replaced by government actors. UL, Good Housekeeping, Consumer Reports, etc are all Non-government ratings agencies that have provided tremendous value to folks over their histories.

    A great personal example of this is The government has been doing crash testing for a long time, but I never even bother looking at it, because IIHS does _Better_ testing and publishes the raw data of those tests, including photographs.

    This page: [] explains how and why IIHS is funded.

    It's exactly what you'd expect market actors to do: figure out how to do something that helps their bottom line. For every car company with an incentive to skimp on engineering to make more profit on a car, there is someone at the IIHS with an incentive to see that nobody is buying cars that hurt people.

    If you spend time trawling through the IIHS data, the survivability of new cars is amazing vs. designs of just 5 years ago. As you move out to the 10 year timeframe its startling how much better new cars are in terms of safety cage deformation and dummy kinetic loads. There is no law that requires BMW to build a stiffer, more survivable car than Dodge. But BMW does, and BMW's customers pay more for a better product.

    Unlike a law saying "cars must be built like this", and the simplistic "stars" rating of the government tests, consumers can look at the IIHS technical data and see just HOW MUCH MORE of their left shoulder is going to get crushed in a side-impact hit in a 5 series vs. a Neon. They can then make a cost vs. risk decision that fits their situation appropriately.

    I never put much stock in car-saftey talk until I looked at the photos and the numbers. The "centimeters past drivers centerline" number in side impacts is most illuminating.

  • by cdrguru ( 88047 ) on Sunday March 14, 2010 @06:31PM (#31475446) Homepage

    Sorry, but the (I think 2006) credit card rules revisions do not allow the credit card company to cancel subscription billing. Nor can they cancel the card to stop the charges. The only way out is to get the company that is making them terminate the subscription billing.

    Subscription billing was introduced fairly recently and is an incredible revenue producer for companies. Many people will utterly ignore the charge month after month and keep getting whatever it is they subscribed to get. And there is nothing you can do about it other than following the cancellation procedure for the company making the charges. The new rules absolutely guarantee that.

  • Re:The Real Scam? (Score:3, Interesting)

    by fuzzyfuzzyfungus ( 1223518 ) on Sunday March 14, 2010 @09:18PM (#31476796) Journal
    I think that your examples illustrate the fact that there is a spectrum(if not quite a continuum) from purely state to purely private actors. And, more specifically, there is no reason that something that is a state function cannot be accomplished in substantial part with private entities. As your examples demonstrate, the private sector is quite decent at coming up with standards for various things, and at doing various sorts of testing. Trying to replace them with a Federal Ministry of Testing would make about as much sense as mandating that police departments start manufacturing their own uniforms and equipment.

    For instance, the IIHS is, as you note, private, and funded by a collection of insurance companies(presumably because lowering risk lowers payouts at least slightly faster than it lowers premiums). So far, so private. However, automobile insurance is somewhere between strongly encouraged and legally mandatory, for anybody who hopes to drive legally, in virtually every state(I think that NH might be an exception, and various other states have alternatives of greater or lesser theoreticalness; but it is virtually compulsory for most of the US driving population). There we go. State intervention has, albeit probably not by design, effectively eliminated the possibility of any substantial number of free riders on IIHS data at the consumer level. It would be interesting to know what is done to discourage free riding at the insurance company level; but individual car buyers almost certainly face legal compulsion away from free riding.

    In the case of UL, their standards design and testing services are indeed private and voluntary. The fact that UL certified components are one of the recognized ways of complying with most state and local fire and building codes, which are neither private nor voluntary, definitely helps sell them, though. Being on OSHA's list of Nationally Recognized Testing Laboratories probably doesn't hurt either.

    Good Housekeeping and Consumer reports do do (generally) excellent work in product testing and have enough institutional spine and brand clout that they can remain reasonably free of regulatory capture(there are some "independent" certifications, the various trendy "green", "organic", "sustainable" ones tend to be especially problematic, that are almost wholly controlled creatures of the industries they purportedly regulate, so clout and independence really matter). They don't do much on the fraud side(it is only in the context of trademark law that the Good Housekeeping Seal is anything more than some nice box art).

    There are some other interesting examples of mixed state/private responses to regulatory issues, some fairly effective, some less so. Financial fraud, for instance, is pretty clearly a law enforcement problem. However, actually availing yourself of law enforcement assistance can be pretty hard for Joe Consumer, particularly if it involves small transactions. As a competitive measure, to increase their market share vs. cash and others, the credit card companies have been fairly aggressive about offering protection services to their customers. Since(at least in the US) the credit card market is somewhere between an oligopoly and a duopoly, they are in a strong position to do so, and being able to "chargeback" is far easier for the user than trying to take things to court. For larger issues, the credit card guys can exercise their comparative advantage in dealing with legal stuff, and tackle large fraud cases and the like. That has, arguably, been a fairly effective arrangement for dealing with the fact that many of the rights that one, legally speaking, enjoys during the course of a transaction are difficult and expensive to actually exercise in the face of a fraudulent opponent.

    On the other hand, the somewhat sordid matter of commercial Institutional Review Boards gives us an example of a situation where private sector handling of a part of a state function (rather predictably) fell flat on its face. IRB approval is required fo
  • by johnlcallaway ( 165670 ) on Sunday March 14, 2010 @11:04PM (#31477590)
    hehe .. I never have a problem.

    I have a Bank of America credit card I use for things like this. BofA lets you create a 'fake' credit card number that is tied to your card, but that you have absolute control over. I can cancel it at will, change the limits up to my card limits, and set the expiration date to any period up to my own credit card expiration date. The cool part is you can also extend them if you choose to, and they are tied to one and only one merchant.

    Whenever I buy anything online, I create a new number with a two month expiration date, and a limit that is $10 more than what the fee is. So next year, the card is no good and they have to come and ask me for a new card number.

    Works GREAT!!! I wish more credit card companies offered it.
  • by rtb61 ( 674572 ) on Monday March 15, 2010 @01:44AM (#31478462) Homepage

    Something is better than nothing, at least they are paying some kind of penalty. For example how much do you get back when someone goes to prison, hmm, nothing in fact you get a bill for keeping them there. Fraud is fraud though, paying back the money really isn't enough, those corporate executives responsible for the decision should be given the opportunity to spend a bit more of our money, the cost of the rehabilitative accommodations. They lied, cheated and stole, where are the punishments for them, they lock up shoplifters and pick pockets that steal a couple of dollars, these people steal millions and there is a civil suit, now that is just bullshit, especially as there is all this evidence floating around of their criminal activities, especially when false perceptions of profitability based upon criminal activities can be used to attract investors.

Thus spake the master programmer: "Time for you to leave." -- Geoffrey James, "The Tao of Programming"