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Why was a scam company able to raise $76 Million Series B?

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Re: Why was a scam company able to raise $76 Million Series B?

#121
post #9

Don't ask for a refund, go to your bank or CC company and charge back the 6 months. That'll hit them where it hurts. Little known fact about chargebacks: the merchant pays an administration fee, typically $20 to $50. Per charge! That is why the smarter scammers refund to everybody who complains, not refunding is plain dumb. This scam has been around for a long time, usually it's adult companies that sell you a 'free'…

[deleted]

Re: Why was a scam company able to raise $76 Million Series B?

#122
In Poland they couldn't take any money for subscription, because all online transactions are done with instant wire transfer, not with credit cards. Buyer has to approve all transactions with sms code. You can define periodic transfers, but not by accident, and you can always stop them.

There are companies (like pobieraczek.pl) that tried this scam but they had to take money through courts, and courts decided it was scam and buyers didn't have to pay.

Re: Why was a scam company able to raise $76 Million Series B?

#123
> It kept me wonder why a company with very questionable (I will try to avoid using the word "fraudulent") business model was able to raise big money

You called them a scam company in the title and the body, so I am curious why the reluctance to use the word fraudulent too. What is the subtle distinction that I'm missing?

Re: Why was a scam company able to raise $76 Million Series B?

#124
post #52

So I went through their checkout process, and up until the credit card stage there is zero indication that it's a membership site (I read everything on every page). I've uploaded the credit card section here: http://i.imgur.com/3di93.png It says you'll be billed month per month on the right hand side under the VIP membership program, but I think it's pretty clear that the page is engineered to be misleading. It looks…

I agree it's unethical. This is a commercial site, it tries to offer goods in exchange for money, anything that costs money should be emphasized and explained. How would they feel if someone managed to take some of their merchandise by stealth? I don't think this is some grey area: if you tricked me into paying a sum I never chose to pay, you're stealing money off my pocket.

It depends on how you do it, you could definitely use mail laws about unsolicited mail to get a package you didn't solicit delivered to your door. If you can do this then you can keep the goods.

The law like anything else is a system, justfab is exploiting it for fun and profit.

Re: Why was a scam company able to raise $76 Million Series B?

#125
post #9

Don't ask for a refund, go to your bank or CC company and charge back the 6 months. That'll hit them where it hurts. Little known fact about chargebacks: the merchant pays an administration fee, typically $20 to $50. Per charge! That is why the smarter scammers refund to everybody who complains, not refunding is plain dumb. This scam has been around for a long time, usually it's adult companies that sell you a 'free'…

Don't forget that doing a chargeback doesn't absolve you from having to pay for services you've legitimately signed up for, it just denies the parties the convenience of settling through the credit card companies. They can take you to court for breach of contract, and if (IANAL) the subscription contract is found to be legit, you have to pay + fees.

They'll argue you checked the checkbox. You'll argue you didn't. It's their word against yours and they will lose, because they can't prove you actually checked the checkbox.

Re: Why was a scam company able to raise $76 Million Series B?

#126

Earlier quoted context omitted.

However the entire right side of the screen is about the VIP program. What exactly could people instead be lured into thinking they're doing here?

Considering the fact that, you end up on the checkout page trying to purchase an item, the jibber-jabber on the right side hardly helps.

Well all their copy tells me that they're a personalized "boutique" aka personal shopper who chooses items for you based on your style.

I'd expect that to be a re-occurring cost.

I suppose it may be out of the norm of some people, especially the HN crowd, but this kind of thing isn't really unusual.

Brick and mortar stores have VIP programs all the time.

Re: Why was a scam company able to raise $76 Million Series B?

#127
Assuming for the sake of discussion that there are unlawful deceptive practices going on, either this company isn't getting the right legal counsel or is choosing to ignore it. Either way that sounds like bad news.

There are plenty of legitimate businesses operating on continuity models (monthly charge, keep sending you stuff until you cancel), but they are regulated at both state and federal levels, and many states have laws with very specific requirements about what must be disclosed and how (e.g., CLEAR AND CONSPICUOUS disclosure on the checkout page, not buried in the site TOS, confirmation by e-mail, easy-to-find link to cancel, etc.). I'm not going to give an opinion on this particular site, but we did a meticulous 50-state review at eHarmony for just this reason, to head off any claims that consumers were somehow being misled about recurring charges. It has to be updated as states change or adopt new laws. The FTC also has jurisdiction but it's much easier to get the attention of state regulators and especially class action plaintiffs' lawyers.

Re: Why was a scam company able to raise $76 Million Series B?

#128
Could you ask your girlfriend how she didn't notice a large recurring charge for 8 months? I would like to know because that is a puzzle I deal with it work.

We sell a software product and service on a subscription basis (not hidden like justfab...it is clear to the customer that they are buying a subscription--the product is kind of pointless without the subscription).

Occasionally I find someone who bought years ago, and apparently stopped using the product. At least, I can tell that they have not obtained updates through our update servers for a long time. Yet they do not cancel the service. It just goes on re-billing them a few bucks a month, every month.

I'm reluctant to cancel their accounts, because maybe they are obtaining updates some other way, such as downloading the latest version and installing it periodically, and their firewall is blocking the update checks. But I am always conflicted, because it could actually be someone that really just doesn't look at their credit card statement, and has no idea he is still paying us years after they stopped using our product.

Re: Why was a scam company able to raise $76 Million Series B?

#129
post #15

So I went through their checkout process, and up until the credit card stage there is zero indication that it's a membership site (I read everything on every page). I've uploaded the credit card section here: http://i.imgur.com/3di93.png It says you'll be billed month per month on the right hand side under the VIP membership program, but I think it's pretty clear that the page is engineered to be misleading. It looks…

Thank you for posting the screenshot. A clear example of a UI anti-pattern IMO. http://wiki.darkpatterns.org/Main_Page

Note that regardless of what the screen shot looks like today, it's very possible the site already improved its disclosure in response to complaints/threats. It would be interesting to go back in time and compare the disclosure at launch to what's on the site today.

Re: Why was a scam company able to raise $76 Million Series B?

#130

Earlier quoted context omitted.

Don't forget that doing a chargeback doesn't absolve you from having to pay for services you've legitimately signed up for, it just denies the parties the convenience of settling through the credit card companies. They can take you to court for breach of contract, and if (IANAL) the subscription contract is found to be legit, you have to pay + fees.

They'll argue you checked the checkbox. You'll argue you didn't. It's their word against yours and they will lose, because they can't prove you actually checked the checkbox.

First: You're in court. That's a whole lot more than you bargained for.

Second: Are you a lawyer? Is that the guaranteed outcome of such cases? Will it really carry no weight that they can (probably) substantiate their claim that you checked the box with a technically sound argument that their website actually works? A manual release test plan, unit tests, cucumber scripts?

That one, single checkbox, and the fact that you have to manually check it, is the legality upon which the entire business hinges. Especially if they're a little shady, they'd be sure to have their stuff in order around this.

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