Millions of netizens hounded every day by spam from Classmates.com must have felt a measure of vindication last week when the company agreed to settle for an estimated $9.5 million a lawsuit leveled against it by its members.
What prompted the lawsuit filed in federal district court in Seattle was Classmates’ practice of sending emails to registered users telling them one of their schoolmates from the past was looking for them. If you want to see who’s allegedly trying to contact you, though, you needed to upgrade your membership to the “gold” level at $39 a year. (Currently, those memberships are being deeply discounted to $9.95) Problem was, after upgrading their memberships, people were finding no one was looking for them at all.
Under the terms of the settlement of the class action lawsuit initially filed in 2008, everyone who upgraded to a gold account after receiving an email enticing them to do so to see a classmate who signed their “guestbook” has the choice of receiving $3 in cash or a $2 credit when they renew their membership. It’s estimated that could affect an estimated 3.16 million members.
In addition, all paying and non-paying members who have joined the outfit since Oct. 30, 2004 must be offered a $2 credit should they decide to renew or buy a gold account.
What’s more, Classmates must pick up the legal tab for the members who sued it, which amounts to $1.3 million, and will be restricted, through an injunction, for two years on how it can use the term “guestbook” and must clarify how guestbooks at the site work.
As is often the case in these kinds of lawsuits, Classmates did not admit to any wrongdoing as a condition of settling the litigation. “Neither this Settlement Agreement, nor any document referred to or contemplated herein, nor any action taken to carry out this Settlement Agreement, is, may be construed as, or may be used as an admission, concession or indication by or against Defendants of any fault, wrongdoing or liability whatsoever,” the settlement agreement stipulated.
For years, the company has been a consumer complaint magnet. At ConsumerAffairs.com there are 177 pages of gripes, largely about unauthorized credit card charges, about the service dating back to January 2006.
The company has also been linked to three companies engaged in dubious “post-transaction marketing” tactics. Those tactics sometimes offer consumers additional offers as part of the online payment process that squeeze more money from buyers without their knowledge.
The companies–Affinion, Vertrue and Webloyalty–were cited last November in a probe of the practice conducted by a Congressional committee . In that investigation, legislative bloodhounds found that 88 companies made more than $1 million by partnering with Affinion, Vertrue, and Webloyalty, including Classmates.com, which made more than $70 million.
“[T]his Committee has found that the companies we are investigating have figured out very clever ways to manipulate consumers’ buying habits so they can make a quick buck,” U.S. Senate Committee on Commerce, Science, and Transportation Chairman John D. (Jay) Rockefeller IV, D-W. Va., said in a statement.
“Millions of Americans are getting hit with these mystery charges every month,” he added. “We have to do all we can to protect the hard working families relying on us to look out for their wallets and well-being.”
Recently, Classmates’ parent company, United Online, said its agreements with the three companies were being either “terminated or modified.”
Classmates isn’t out of the legal woods yet. Last week, two members sued the company over changes it made to its default settings to make member information more generally available on the Internet. Those changes, the lawsuit maintains, open up members to all kinds of unsavory activities such as identity theft, harassment and stalking. It also asserts that the changes are a breach of the service agreement between Classmates and its members, as well as violate the federal Electronic Data Privacy Act and Washington state consumer protection law.
In recent months, privacy has been a sore point at social networking sites. Changes in the privacy settings used by Classmates’ leading rival, Facebook, set off howls of protest on the Internet.
“These new ‘privacy’ changes are clearly intended to push Facebook users to publicly share even more information than before,” railed Senior Staff Attorney Kevin Bankston in a commentary published at the Electronic Frontier Foundation Web site. “Even worse, the changes will actually reduce the amount of control that users have over some of their personal data.”