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Classmates.com Settles Lawsuit Over Phony Friends

Soulskill posted more than 4 years ago | from the enjoy-your-three-bucks dept.

Social Networks 127

Hugh Pickens writes "Techflash reports that Classmates.com 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, Classmates.com 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 Classmates.com membership. Classmates.com 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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FAAAAAAART (-1, Offtopic)

Anonymous Coward | more than 4 years ago | (#31473256)

Oops I farted.

Typical Social Networking scam (-1, Flamebait)

Anonymous Coward | more than 4 years ago | (#31473258)

I have only one word to say about users of this site

Suckers

Why would anyone take the $2 credit? (1, Insightful)

Anonymous Coward | more than 4 years ago | (#31473290)

Even if you love Classmates.com after they scammed you, why wouldn't you take the $3, apply $2 yourself to your renewal, and spend the other $1 on a hamburger or something.

Re:Why would anyone take the $2 credit? (1, Insightful)

Anonymous Coward | more than 4 years ago | (#31473322)

If someone harms you, a very common way of pretending that you weren't harmed is to pretend you wanted it anyway. I suspect that many people who know they were ripped off will be life long subscribers in order to prove to themselves and others that they would have subscribed anyway.

The $2 credit is more convenient. Losing $1 is just the tip of the iceberg.

Re:Why would anyone take the $2 credit? (4, Insightful)

sopssa (1498795) | more than 4 years ago | (#31473344)

And they're both so small amounts that in the end no one will care about it and classmates.com probably needs to spend 0.5% of the amount they were asked to pay up.

Re:Why would anyone take the $2 credit? (3, Insightful)

obarthelemy (160321) | more than 4 years ago | (#31473556)

'cept the lawyers, who were probably on a % of max payout. Which is why we get a huge total amount, made of negligible individual payouts: lawyers win big, classmates pays nothing besides the lawyers.

Re:Why would anyone take the $2 credit? (0, Funny)

Anonymous Coward | more than 4 years ago | (#31473526)

why wouldn't you take the $3, apply $2 yourself to your renewal, and spend the other $1 on a hamburger or something

Is the average person that pays for a Classmates.com subscription smart enough to figure that out?

Re:Why would anyone take the $2 credit? (1)

SkyDude (919251) | more than 4 years ago | (#31473668)

why wouldn't you take the $3, apply $2 yourself to your renewal, and spend the other $1 on a hamburger or something

Is the average person that pays for a Classmates.com subscription smart enough to figure that out?

I don't know about that, but I'll take the two bucks and get some good cheap wine. [cbsnews.com]

Re:Why would anyone take the $2 credit? (1)

Omestes (471991) | more than 4 years ago | (#31474034)

You'll need to take the whole lump and apply it to wine. 2 Buck Chuck has long been 3 Buck Chuck, at least where I live.

Re:Why would anyone take the $2 credit? (2, Insightful)

thomst (1640045) | more than 4 years ago | (#31473568)

Er .. because they're stupid?

This company is owned and run by Mark "NetZero" Goldston, after all. He's made a succession of fortunes from exploiting the gullibility of people who can't do simple math (i.e. - enormously oversubscribed dial-up service == browsing at the speed of a slug on drugs + you get auto-disconnected after an hour online), or, evidently, read. He's repeatedly made it clear that he's a slimeball of Steve Case proportions, so in what world would you expect classmates.com to vary from the Goldston standard model?

His target audience is cretins, so of course they're gonna take the two bucks!

Re:Why would anyone take the $2 credit? (1)

carlzum (832868) | more than 4 years ago | (#31473922)

That's the problem with class action suits. These people spent about $10 to get in touch with old friends and didn't get what they paid for. Even if they wanted to pursue a full refund the terms of the settlement probably prevent it.

I didn't see the details, but I suspect they have the option of taking the $3 or receiving the credit if they fail to respond. I'm sure most people will never see the letter or not bother to collect the three bucks. I received a similar settlement from BlockBuster a few years ago and just tossed it in the garbage.

Re:Why would anyone take the $2 credit? (2, Informative)

rekoil (168689) | more than 4 years ago | (#31474320)

Class action lawsuits are *never* for the benefit of the actual aggrieved parties. They're simply cash cows for tort lawyers. Bill Lerach actually got caught *paying* people to be plaintiffs in shareholder class action suits - he went to jail for that, but how many others didn't?

Re:Why would anyone take the $2 credit? (3, Insightful)

nomadic (141991) | more than 4 years ago | (#31475190)

Class action lawsuits are *never* for the benefit of the actual aggrieved parties. They're simply cash cows for tort lawyers. Bill Lerach actually got caught *paying* people to be plaintiffs in shareholder class action suits - he went to jail for that, but how many others didn't?

Not true; "class actions" are simply lawsuits where one or more parties represents a class of persons because joining ALL those persons would be impractical. You can have class actions that have nothing to do with torts. And the idea that individual class members never benefit is just not so. I've seen class actions where individual class members received millions of dollars. It all comes down to what the nature of the underlying claim is, not whether it's a class action or not.

Who would take the $2 ? (4, Insightful)

sackvillian (1476885) | more than 4 years ago | (#31473296)

Classmates.com 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 Classmates.com membership.

Huh? They're offering a cash payout or 33% less money that you can only spend on the site that scammed you?

Better get working now on a decision-making chart if this applies to you.

Re:Who would take the $2 ? (1)

sopssa (1498795) | more than 4 years ago | (#31473358)

Well, who would go for the trouble of cashing out mere $3?

Re:Who would take the $2 ? (4, Insightful)

mister_playboy (1474163) | more than 4 years ago | (#31473418)

Indeed. People have a strong psychological bias against doing something for a token reward such as this. Tests have shown that people would rather do a task for free than for a small amount of money. Working for free can be rationalized as being nice and doing a favor, but how can you rationalize doing something for $2? It just makes a person feel cheap and undervalued.

Re:Who would take the $2 ? (2, Insightful)

Mistlefoot (636417) | more than 4 years ago | (#31473488)

A $3 cheque will cost you $4 in time and gas to cash. There is a bit of sarcasm in that comment, but there is some truth too.

When google adsense first started, they made small payouts in some situations (year end or something, i can't quite remember). I was sent a cheque for $6.48.
That cheque is tucked in a photo album somewhere. It was kind of cool getting that first cheque from google and, although I highly doubt the value will ever be greater then sentiment, who knows.

Regardless. It's not a $6 that I will ever miss.

Re:Who would take the $2 ? (1)

ImYourVirus (1443523) | more than 4 years ago | (#31474782)

Usually checks expire after a certain time like 180 days, so eventually the check with be worth nothing other than sentiment, the thought that it could ever be worth more in the future is moot.

Re:Who would take the $2 ? (1)

Ihmhi (1206036) | more than 4 years ago | (#31476418)

Well yeah, if you specifically drive out to cash that $3 check it's stupid. Just hold onto it and deposit it in your bank on your next planned trip.

Re:Who would take the $2 ? (0)

Anonymous Coward | more than 4 years ago | (#31476720)

This is probably correct. There is an accountant somewhere who guessed the proportion of people who would cash a $3 payment, so if that proportion is p, the payout on average would be 2(1-p)+3p. But that means that the average payout has to be greater than $2.

So Classmates.com had a fixed budget for this and decided doing this would minimize the total amount spent. Obviously to minimize cost $2 for everyone would have worked, but is not what we are seeing. Probably nothing to be read too deeply into this.

Re:Who would take the $2 ? (1)

halowolf (692775) | more than 4 years ago | (#31475594)

Welcome to marketing 101. You know those cash back offers that they use to sell products? Buy this computer/toaster/cappuccino maker at full price then send in this coupon to get X dollars back 3 months later? Guess what, a whole heap of people buy stuff for the offer then forget to send in the coupon or just end up not being bothered to. Marketeer's count on this and use this behaviour to profit from it.

Re:Who would take the $2 ? (1)

morgan_greywolf (835522) | more than 4 years ago | (#31473436)

Well, for a little over $3, you can get a cheap fast-food meal. That's lunch!

Re:Who would take the $2 ? (5, Insightful)

Like2Byte (542992) | more than 4 years ago | (#31474810)

Well, for a little over $3, you can get a cheap fast-food meal. That's lunch!

CM.COM: "OK, so we tried to fraudulently obtain money from you by lieing our asses off about your buddy trying to contact you. Here's lunch. Better now?"
Me: Shove that lunch up your ass!

Why is it that Company X defrauds someone and they only have to pay back 33% of what they collected to the victim; but, if Joe Schmo does it he gets ~1yr jail time or some such judicial or civil penalty?

Re:Who would take the $2 ? (1)

TangoMargarine (1617195) | more than 4 years ago | (#31476416)

So there *is* such a thing as a free lunch!

Re:Who would take the $2 ? (1)

moteyalpha (1228680) | more than 4 years ago | (#31473422)

perfect_victim.com It would seem that this is the sweet spot for any company. The list of people who can be milked like LOLcows forever. If I had a list of people who would fall for any trick and had money from some source it would be the most valuable list. It is also sleezy. A list of free thinkers that are not easily manipulated would be useless except as an exclusion.
I have some sigs that you can buy if you upgrade to the premium sig store. All your friends already got one here. Have your credit card ready and sign in at sigmates.com.

Re:Who would take the $2 ? (1)

TubeSteak (669689) | more than 4 years ago | (#31474100)

Huh? They're offering a cash payout or 33% less money that you can only spend on the site that scammed you?

Once in a while It'd be nice to see an Attorney General tell [corporation] to stuff their settlement offer and face the Jury.

I can't imagine a Jury would think $2~$3 per person is a reasonable settlement.
It doesn't even make the scammed individuals whole again.

Re:Who would take the $2 ? (1)

Golddess (1361003) | more than 4 years ago | (#31475292)

Can you even get a jury trial in civil court?

Attorney fees (1)

maxume (22995) | more than 4 years ago | (#31473314)

Not indescribably wacky: the settlement specifies that the court determines the final amount, with an upper limit of $1.3 million.

Of course, members of the class still barely get enough to make it worth checking it out.

Re:Attorney fees (1, Insightful)

Anonymous Coward | more than 4 years ago | (#31473370)

But don't worry, the lawyers will make a bundle. Hmm. I wonder why we have so many lawsuits against big companies.

Re:Attorney fees (1)

maxume (22995) | more than 4 years ago | (#31473388)

I think it is a good thing for there to be some incentive for the lawyers to take the case; 10% of the class award is not completely out of control.

(In this case, Classmates could have avoided the suit by not misleading their customers, I'm not sure why you would feel any sympathy for them)

guest book larger than graduating class (1)

enbody (472304) | more than 4 years ago | (#31473316)

Classmates has notified me weekly of multiple sign-ins to my guest book for years, adding up to more guest book sign-ins than students in my graduating class. Apparently I had not realized how popular I was! Being a nerd led to a reluctance to socialize that saved me from this fraud.

Re:guest book larger than graduating class (2, Insightful)

johnlcallaway (165670) | more than 4 years ago | (#31473458)

And .. like most intelligent people .. you weren't fooled by it. So a bunch of stupid people who have no clue were taken in by a deceptive ad. I'll be that's the first time that ever happened. (Now .. where did I put those sarcasm tags...)

I used to pay for a premium membership so I could send emails to former classmates. During that time, I connected with several friends that I had lost touch with and still regularly send emails. One of those high school friends I am married to now. It was worth it those first few years when it was the only game in town.

I haven't paid for a premium membership in years. I watch my list of classmates, and if anyone new pops up that I want to email, I'll try to find them on facebook. And I'm really not interested in who signed my guest book .. I've contacted all of my old classmates that I wanted to that were on the site.

Re:guest book larger than graduating class (1)

magarity (164372) | more than 4 years ago | (#31474724)

I haven't paid for a premium membership in years
 
I've heard another of their scam-lite routines is to make it darn near impossible to unsubscribe. Did you have any trouble getting out?

Re:guest book larger than graduating class (1)

couchslug (175151) | more than 4 years ago | (#31474418)

Being devious allows non-paying members to circumvent communication restrictions and exploit the site without paying or violating TOS.

I connected with the friends I wished to, and didn't send Classmates a dime. They'd have to break their site to stop this. :)

Re:guest book larger than graduating class (1)

Machtyn (759119) | more than 4 years ago | (#31474584)

I tried classmates for awhile when they offered a decent free service. But then they started to charge for access. I didn't like my school well enough in the first place.

But I digress. Since they did start offering their site as a pay service I started getting their spam. I didn't realize they were slightly crooked about the spam. They seem like the juno.com of social networking... when google and yahoo started offering free email with loads of storage space and increased attachment size, juno reduced their storage space from 5MB to 2MB (not GiB) and started charging for larger attachment sizes.

Re:guest book larger than graduating class (1)

malp (108885) | more than 4 years ago | (#31476890)

Classmates.com made sense when it came out in 95. It's been obsoleted by free alternatives such as facebook. I got the email from them and realized any classmates of mine were more likely to be on the free alternatives.

The Real Scam? (4, Insightful)

Anonymous Coward | more than 4 years ago | (#31473318)

The legal system! What kind of justice is this? Classmates.com made $70million for being deceptive ($60million less this judgment) while getting a slap on the wrist, the lawyers get the bulk of the $10million, and what has changed? Nothing! Companies can continue to make profits, abuse customers and the public, and know that in the end all they will lose is just a tiny bit of the profit they made even if they break the law!

Re:The Real Scam? (4, Funny)

johnlcallaway (165670) | more than 4 years ago | (#31473510)

It's social evolution. Only stupid people were taken in by the ads. Now, those stupid people have less money and their friends mock them, so they can't breed, except with other stupid people. Eventually their offspring will be so stupid even breeding won't be possible.

In fact, they are so stupid that they'll think $3 is a great deal.

Thank you Classmates.com for helping get rid of stupid people.

Re:The Real Scam? (5, Funny)

Anonymous Coward | more than 4 years ago | (#31473552)

Eventually their offspring will be so stupid even breeding won't be possible.

Obviously you have never been to Alabama.

Re:The Real Scam? (2, Interesting)

Montezumaa (1674080) | more than 4 years ago | (#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 Classmates.com 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 Classmates.com 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 Classmates.com is providing a bad service and "nature will take its course", so to speak.

Re:The Real Scam? (4, Insightful)

fuzzyfuzzyfungus (1223518) | more than 4 years ago | (#31473696)

The efficient operations of free markets require good information to be available. The further you get from good information, symmetrically available, the further your results will get from any of the ideal free market outcomes. This (in addition to the fact that people generally dislike getting scammed) is why things like false advertising and lying on your SEC filings are illegal.

Neither the economic theory of free markets, nor any of the historical examples of approximately free-market structures, support the notion that free markets will actually adequately control fraudulent actors. If you make some sufficiently optimistic assumptions about the speed with which "word of mouth" works vs. the speed of advertising, astroturf, sneaky rebranding of tarnished firms, etc. you can probably make the models say that it will work; but those assumptions are nonsense).

Even in situations where selection does occur at the firm/brand level(if, for instance, Classmates.com were to falter due to their reputation for false advertising and general worthlessness) that helps you very much less than you might expect. Remember, the "rational actors" are not the firms themselves; but the people behind them. If I can extract enough money from my scam before its inevitable implosion, my scam's implosion will not dissuade me in the slightest from further scamming. Since these ownership relations tend to be quite obscure by the time you get to the consumer level(even the ones that aren't actively secretive can get very complex very fast, and virtually nobody has the cognitive resources to keep up with ownership structures for more than a tiny fraction of the firms they deal with in a day), it is eminently possible for bad actors to move from scam to scam for years, reaping substantial rewards.

Re:The Real Scam? (2, Insightful)

Anonymous Coward | more than 4 years ago | (#31474016)

In addition to the one above, there is a second main line of argument in favour of fraud investigation and enforcement being a state rather than market function: specialization of labour.

It is abundantly obvious, in the majority of areas of activity, that specialization increases productivity and efficiency substantially. There are some niches where generalists are quite useful; but specialization and trade are(perhaps only second to fossil fuels) the reason why modern society is wealthy beyond the dreams of prior societies.

Given that, the "well, informed consumers will eventully solve the problem" or "If you'd just been an informed consumer, the scam wouldn't have happened" arguments are economically unrealistic. Depending on the exact flavour of fraud in question, its detection can require any number of skills: forensic accounting, detailed examination of organizational structures, analytical chemistry, electrical engineering, toxicology, investigative reporting, dumpster diving, whatever. There are a lot of different ways to lie and defraud. Most are detectable, often pretty easily, if you know the right things, have the right skills, and ask the right questions(and, since you are dealing with liars, "asking" can require dumpster diving, subpoenas, or a sock full of quarters...) Then, of course, once you've detected the fraud, you have to either shut it down, or advertise that it is a fraud broadly enough for market pressures to shut it down, itself requiring resources and specialized skills to do well.

Because of this, you almost certainly get more fraud prevention per dollar by having a fairly small number of dedicated fraud detectors than by having everybody dedicate a small portion of their time and energy to the matter. Since free-riders on these dedicated fraud detectors would be an issue, there is a good argument in favour of making this fraud detection a state function, along the lines of law enforcement more generally(the one distinction to keep in mind, though, is that while law enforcement is generally an exclusive state function, outside of self-defence, because having vigilantes running around causes real issues; there is no reason why fraud detection needs to be. If TV News Channel 5 can sell attract viewers and sell ads by having an investigative reporter run around town and produce "Fraudbuster!" that's great. If Dell wants to hire some electrical engineers to investigate a possible PSU supplier, good for them.)

Re:The Real Scam? (2, Interesting)

bmajik (96670) | more than 4 years ago | (#31474448)

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 IIHS.org. 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: http://www.iihs.org/about.html [iihs.org] 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.

Re:The Real Scam? (2, Interesting)

fuzzyfuzzyfungus (1223518) | more than 4 years ago | (#31476796)

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 for pretty much all human, and most animal, medical research in the US. Traditionally, IRBs would be associated with universities and the like, and consist of faculty and community members who couldn't get out of yet another exciting committee duty. Not necessarily the most efficient or customer-service-oriented arrangement in the world. So, up sprang private, for-profit IRBs, offering dedicated staff, efficient customer service, and so forth. Now, I suspect that these fully private outfits do, in fact, provide much snappier service. Their clerical overhead is probably lower, and they likely return phone calls faster. Trouble is, the IRB is supposed to be vetting the study for ethical suitability; but what the customer wants is approval. Shockingly enough, competitive pressures quickly drove up the standards of customer service, making approval for just about anything ever easier to get. There have been a number of awkward investigations and shutdowns; but it's very much swimming against the economic tide.

As I said above, I have absolutely nothing against private-sector anti-fraud mechanisms. Where it is possible to arrange incentives such that they exist, that is generally a good thing. In addition, I have nothing against state entities contracting aspects of their work to private entities, if that happens to be the most efficient way of getting them done(though the knee-jerk assumption that contracting is always more efficient, immune to contrary evidence, does piss me off). However, I think that the fact that fraud is ultimately a state law enforcement matter cannot, and should not, be avoided.

In general, because part of the argument is founded on specialization of labor/comparative advantage, the individual customer's role will always be greater with larger transactions than with smaller ones. If Foo corporation wishes to buy Bar corporation for $500,000,000, having or hiring their own people to do some due diligence should be standard. If Joe Consumer just wants to be able to buy some vitamins without getting something that is 5% lead and having his credit card number stolen and used for fraudulent transactions, there is only so much individual "buyer beware" that you can recommend before you end up swamping all low value transactions in transaction costs. Much more efficient to specialize.

Re:The Real Scam? (1)

bmajik (96670) | more than 4 years ago | (#31477100)

Thanks for the well written response.

The Vitamins example is interesting for two reasons. One, I'm a proponent of eliminating the FDA. The FDA sends a number of Americans to their graves every year by preventing people from experimenting with untested protocols that they and their doctors might be willing to try, having exhausted other options. Milton Friedman gives the FDA case special attention in "Free to Choose", and I think it's a good point that I certainly don't do justice to here.

For the benefit of people who might be reading this, let's be sure we're not mixing two issues. There is the issue of the fly-by-night drug maker developing a bad product, and then there is the issue of claiming something false.

Most people would assert that the FDA has taken over the role as gatekeeper of product quality, and under their care, lead-as-vitamins would not come to market. But this isn't the case. The procedures for avoiding FDA scrutiny are straightforward: simply claim that your product is not allowed to specify a health or medicinal purpose, and the FDA stays away. So we've got lead-vitamins on the shelves.

We have an information problem and a specialization problem as you point out: Joe can't be expected to do a careful study of every vitamin available to him. Who can? In the past, it was Joe's grocer who did this. Once upon a time, the retailer was an expert in the products he chose to stock, and he provided a very valuable service: keeping bad products off his shelves and away from his customers. Alas, the lack of owner/operator grocery stores [and owner/operator stores in general] has led to a decline in quality dynamic of retail transactions.

Today, there is still a buying manager that decides how to stock grocery shelves, but she is far away from the store where the product is puchased. I don't have any insight into how effective of a force for consumer good the modern, distant, _more_ specialized buyer is vs. the grocer of yesterday. I think unfortuneately the FDA and USDA have allowed specialist buyers to rest on their laurels: In a case of good money leaving when bad shows up, when the Feds create regulatory bodies, in many cases, private regulations that specify a higher merit, standard, or quality tend to disappear and all providers manage-down to the level of government certification. [Cars and IIHS are an interesting counter-example, fwiw.] The long and short of it is this: when there are e-coli. problems that "get past" FDA/UDSA regulated entities and show up on grocers shelves, one wonders if there is any private entity between the seller of the damaged goods and the ultimate buyer who can or should act as a quality control agent.

It would probably be useful for me to pull a Francisco D'Aconia maneuver and work as a produce stocker in a grocery store for a while. Alas, I wasn't born pre-destined to wealth and cannot afford the vacation from reality and my current income :)

The second aspect of the discussion revolves around who should specialize in the investigation and prosecution of fraud. Fraud is a crime. Apart from the most strident anarchists, most people concede that the prosecution of crimes and the punishment of criminals is the sole domain of a uniform body of specialists who have a _monopoly_ on that activity, i.e., a government. The notion of competing governments or competing ideas of due process are interesting but not sufficiently explored, IMO.

Re:The Real Scam? (2, Insightful)

clarkkent09 (1104833) | more than 4 years ago | (#31474066)

This is the way capitalism and and open-and-free market works.

Not really. If a company promises and charges you for one thing and then provides another you have every right to sue. It's really just a simple case of fraud. Not even the most ardent supporters of free market capitalism, in which group I count myself, would argue that there shouldn't be laws against fraud.

Re:The Real Scam? (3, Insightful)

jareth-0205 (525594) | more than 4 years ago | (#31474450)

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.

Huh? Really? I was under the impression (in the UK atleast) that if somebody sells you something, then *that thing* is required to work as advertised.

Why should anyone be able to sell you something fraudulently, even once? It's not government nannying, it's called consumer protection. Your argument doesn't scale anyway, if someone sells you a new car and doesn't include an engine, should you not be entitled to some recourse? Just because the value is smaller doesn't change the principle.

Re:The Real Scam? (1)

justinjstark (1645867) | more than 4 years ago | (#31474796)

So let's say I tell you I will sell you a new flat-screen tv for $3000 and send me payment. But, instead of me sending a tv, I send you a piece of paper saying "Sucker." And you think this is okay because now you know not to do business with me again?

I don't think that's how the free market is supposed to work.

Re:The Real Scam? (1)

Renraku (518261) | more than 4 years ago | (#31473614)

Because the lawyers aren't interested in running the company into the ground. They know that the more money they ask for, the more money will be spend by the defense on expensive lawyers, so it's better to grab the low hanging fruit of $10 million than it is to ask for all of the ill-gotten profits.

Honestly, the judge should pass this on to criminal court once it gets out of civil court. "So, Classmates.com, it appears that you've been lying to customers to get their money. This is theft by deception at its least, and fraud at the most. How about $100 million payable to all your subscribers in the form of a check?"

Re:The Real Scam? (2, Insightful)

KiahZero (610862) | more than 4 years ago | (#31473748)

In what universe is 10% "the bulk?"

Also, you have to remember that this is a settlement, not a court decision. A settlement, being a compromise between the plaintiffs and defendants, will naturally be less than what the full value of the judgment could be. Additionally, the lawyers would have gotten much more in fees had the case gone to trial, because trials in class actions can get very expensive very quickly.

Re:The Real Scam? (0)

Anonymous Coward | more than 4 years ago | (#31475772)

The real scam is that you didn't RTFA, this is the "fake friends" lawsuit not the "post transaction" one.

Scammers (0)

Anonymous Coward | more than 4 years ago | (#31473332)

They should just be shut down. Especially for the policy of committing people who are unaware to further payments with other entities.

Transaction fees... (1)

davecrusoe (861547) | more than 4 years ago | (#31473338)

Man, all of those transaction fees probably cost more than $2/user. What a waste of time - except for the lawyers involved! On the flip side, thankfully there are prosecutions of marketing and selling techniques such as these. Somewhere out there is a future of simpler, more secure and less scammy online transactions... somewhere... over the rainbow...

Full Refund?? (1)

Rivalz (1431453) | more than 4 years ago | (#31473364)

Why the hell wasn't a full refund the lowest option.

Re:Full Refund?? (1)

NevarMore (248971) | more than 4 years ago | (#31473404)

Because these things are usually designed to be punishment to the defendant rather than a refund for the plaintiffs.

Re:Full Refund?? (1)

Penguinoflight (517245) | more than 4 years ago | (#31473440)

It's almost like the corrupt corporations are in league with the government. If only somebody had told us this was going on... [eff.org]

Re:Full Refund?? (1)

Macrat (638047) | more than 4 years ago | (#31474012)

It's almost like the corrupt corporations are in league with the government.

The corporations ARE the government.

Is it just me? (1, Interesting)

Anonymous Coward | more than 4 years ago | (#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.

Re:Is it just me? (-1, Troll)

Anonymous Coward | more than 4 years ago | (#31473562)

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.

Jewish scum at that. No, it's just you. They're all from the same cookie-cutter, aren't they?

You get what you deserve (0)

Anonymous Coward | more than 4 years ago | (#31473392)

Any moron who paid money to join a "social network" like classmates, instead of just spending a few minutes googling for the persons they wanted to reach, deserves to be punked. Seriously, who really cares about this?

i can t get it how it all works (-1, Offtopic)

Anonymous Coward | more than 4 years ago | (#31473398)

nice post but i didnt really get the point .. when we pay the old fellows from school will be find by this site or what ? i ve found a lot more interesting site http://www.legalhighbuy.com/

Similar experience (5, Interesting)

johnw (3725) | more than 4 years ago | (#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.

Re:Similar experience (1)

W3bbo (727049) | more than 4 years ago | (#31473806)

Was it GenesReunited? I can't say I've had the same problems you described (but then, I never really put in any information about myself).

Re:Similar experience (2, Insightful)

Blue Stone (582566) | more than 4 years ago | (#31473848)

Please tell us which site this was. I have parents who are interested in the whole genealogy thing and would like to be able to warn them to steer clear of any scam sites.

I always knew it was fake (1)

Saint Stephen (19450) | more than 4 years ago | (#31473414)

I have been getting these emails for years, and I *always* knew it was a fake - I never logged on to actually see that it was a fake robot posting, because that would have been too depressing.

I think probably everyone on this sight has enough experience with "popular" not to have fallen for this :-)

If you did fall for it, well what a pathetic loser you are! :-)

Obigatory Onion article (3, Funny)

WD (96061) | more than 4 years ago | (#31473428)

Re:Obigatory Onion article (2, Insightful)

John3 (85454) | more than 4 years ago | (#31473870)

I immediately thought of this Onion article, especially after I read about how profitable Classmates.com is. I can't believe people subscribe to this service when you have Facebook, MySpace, and even Google to assist in locating old classmates. There are Facebook groups for nearly every school imaginable, as well as groups for each graduating class, even groups within a graduating class. As funny as the article in The Onion is, it appears that the Classmates.com management knows plenty about Facebook and still manages to remain profitable.

Japanesepod101.com (5, Interesting)

bananaendian (928499) | more than 4 years ago | (#31473438)

Japanesepod101.com 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:Japanesepod101.com (1)

iCantSpell (1162581) | more than 4 years ago | (#31473536)

*cough* AOL *cough*

Re:Japanesepod101.com (2, Insightful)

Kjella (173770) | more than 4 years ago | (#31473560)

They offer a 'free trial' (...) and then persuade you to give them your credit card details

Stop. That's the only two facts you need to know: This is with 99% certainty some form of hidden subscription or renewal. Also here in Norway they can do the same with the cell phone. If they want your credit details and it sounds too good to be true, it's too good to be true.

Re:Japanesepod101.com (1)

Jah-Wren Ryel (80510) | more than 4 years ago | (#31475204)

Also here in Norway they can do the same with the cell phone.

Are you saying that simply knowing your cell phone number and maybe your name is enough for a company to successfully bill someone for money in Norway?

If so, that's fucked. I'm unhappy that I need to give my billing address and real name to make a purchase for 'virtual products' like web subscriptions if I want to pay with a credit card because I can't control what the merchant will do with that information, but going to something as public as your phone number instead of the semi-secret CC# is even worse.

Re:Japanesepod101.com (1, Insightful)

Anonymous Coward | more than 4 years ago | (#31473656)

Which is why one-time-use credit cards is nice. If they keep trying to charge against it, they get investigated for fraud from the CC company.

Just call your CC company (1)

istartedi (132515) | more than 4 years ago | (#31473908)

It's better to not deal with companies that need a CC for "free" trials; but if you screw up and get in a situation like this, just call your CC company, complain, and tell them to reject any charges from them. It's not like it's the power company and they can turn off your lights. They'll eventually just stop provisioning you with (service you don't need). Problem solved.

Re:Just call your CC company (2, Interesting)

cdrguru (88047) | more than 4 years ago | (#31475446)

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.

I suppose ... (4, Funny)

PPH (736903) | more than 4 years ago | (#31473502)

... the next thing you are going to tell me is that all these hot girls in my neighborhood advertising on various web sites aren't real either. That would be a tragedy.

After being stood up by a bunch of high school friends that never gave be the time of day when I was there, I was looking forward to some female companionship just to sooth my bruised ego.

Fraud? (4, Informative)

shentino (1139071) | more than 4 years ago | (#31473508)

Excuse me, but where are the punitive damages?

Re:Fraud? (2, Informative)

ffflala (793437) | more than 4 years ago | (#31474258)

The settlement also calls for Classmates.com to pay attorneys for the plaintiff up to $1.3 million in fees, with the court determining the actual amount. The lead plaintiffs in the case, Anthony Michaels and David Catapano, would each receive $2,500 as part of that provision.

It's a settlement; these aren't damages and Classmates.com is admitting no wrong doing.

What has happened here is that the two guys who bothered to bring suit against Classmates.com have been paid $2500 (and their attorney fees have been covered). Considering that it was a ~$10 fraud, that seems like relatively steep punitive damages in their case. Everybody else who was similarly deceived --but who didn't bother doing anything about it-- will get a whopping $3.

I'm not saying these terms are fair, just that the lead plaintiff aspect in class action lawsuits is supposed to encourage people to complain.

Re:Fraud? (1)

shentino (1139071) | more than 4 years ago | (#31475262)

Perhaps, but if all the bad company gets is a slap on the wrist, it remains profitable to defraud.

Re:Fraud? (1)

fredmosby (545378) | more than 4 years ago | (#31476144)

It sounds like they bribed the lawyers to make the suit go away. They just called it a 'settlement' to make it legal.

Jews again... (-1, Troll)

Anonymous Coward | more than 4 years ago | (#31473518)

CEO Mark Goldston

That's all I needed to hear! What is it with Jew crooks like Mark Zuckerberg [slashdot.org] and this clown using social networks to rip people off? Seems like wherever there's a social network, there's a Jew ripping people off.

Re:Jews again... (-1, Offtopic)

Anonymous Coward | more than 4 years ago | (#31473938)

CEO Mark Goldston

That's all I needed to hear! What is it with Jew crooks like Mark Zuckerberg [slashdot.org] and this clown using social networks to rip people off? Seems like wherever there's a social network, there's a Jew ripping people off.

Yeah. Lovely fuckers, aren't they? [politicaltheatrics.net]

Re:Jews again... (0)

Anonymous Coward | more than 4 years ago | (#31474022)

All you need to glass every man, woman and child from Greece to India is to read what they write themselves.

I'm still trying to find (1)

Low Ranked Craig (1327799) | more than 4 years ago | (#31473524)

The chick with the big rack that's been go googling me according to the ads on my Facebook page...

Re:I'm still trying to find (0)

Anonymous Coward | more than 4 years ago | (#31473566)

Why would you want to do that? She's got a bigger dick than YOU do.

Case in point re class action lawsuits (2, Interesting)

PingXao (153057) | more than 4 years ago | (#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.

Re:Case in point re class action lawsuits (3, Insightful)

phantomfive (622387) | more than 4 years ago | (#31474420)

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.

I'll bet if you look at the logic trail you followed to reach that conclusion, you'll find that it was a path the average user won't be able to follow. People who commit fraud should be punished.

Borderline Criminal (0)

Anonymous Coward | more than 4 years ago | (#31473640)

I'll take the $3.

I want it in 300 separate $0.01 payments, through paypal, at your own expense.

Then I'm going to submit you to my marketing partners as you go through the checkout process, and add about $40 in fees through additional 'offers' you probably never even saw.

Justice will be served.

Still doing it (3, Interesting)

Plekto (1018050) | more than 4 years ago | (#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.

congratulations (1)

brennz (715237) | more than 4 years ago | (#31473666)

You scammed your users but part of accounting is to consider goodwill. Just like SCO, you are now in the negative.

I can't wait for Google to enter that market and bankrupt you.

$3 hardly a refund (0)

Anonymous Coward | more than 4 years ago | (#31473730)

After a bit of googling (since you won't find out the price until you hand over your information), Classmates.com charges $39.00 for membership. I could be wrong but as I said until you hand over your info (which I am sure as hell not doing) you arent told the price. But my point is, if these people are getting $3 back after paying $39 then they are hardly getting a refund? Can someone clear this up?

New site - Classactions.com (0)

Anonymous Coward | more than 4 years ago | (#31473760)

I have created a site that lets you meet up with the cash that is due to you from class action lawsuits - at classactions.com!

Our records indicate that the following class action receipts can be claimed by YOU! Yes YOU could have this money in YOUR hand next week*: $40, $2.50, $7, $13.25 ! Membership is only $9.99 per month!

* Examples of money that could be claimed by a person that isn't representative only and should in no way be construed as claiming or representing that they could be claimed by you.

Meetup.com (2, Funny)

DrFalkyn (102068) | more than 4 years ago | (#31473824)

Yeah, i think meetup.com would do this. I remember tying to start a pickup soccer group a while back.. we had maybe a dozen people confirm a meeting, and then two showed up.

Re:Meetup.com (3, Informative)

Bill Dimm (463823) | more than 4 years ago | (#31474208)

If you are accusing meetup.com of having phony people RSVP to your event, I kind of doubt it. What purpose would it serve? You've already paid for the subscription before anyone signs up for your event, and having a bunch of fake sign-ups certainly isn't going to help encourage you to renew your subscription in the future since you'll know they are no-shows before your next payment is due (in sharp contrast to classmates.com, where the fake stuff is used to grab your initial payment). I belong to several meetup groups, and I've never gotten the impression that the no-shows weren't real; they're just flaky people.

Re:Meetup.com (1)

DrFalkyn (102068) | more than 4 years ago | (#31474394)

I think the hope was that if they had phony people sign up to the event, the group would become popular enough so that real people would start signing up as well. Kind of like if someone is holding a party, there are lots of people that aren't going to go unless there's enough people there, it becomes a catch-22. This was several years ago, maybe they don't do that anymore, I know people who haven't had positive experiences with meetup.

why is it that all teh class action suits... (1)

3seas (184403) | more than 4 years ago | (#31473854)

...I've been a member of always have a payoff to the consumer members that reads like an advertisement to benefit the wrong doer? hell I've seen typical store coupons worth more than any of these class action suits were to give the members.

Phony Friends...... (1)

3seas (184403) | more than 4 years ago | (#31473880)

.....like we didn't have such in school long before the internet was here.

Most profitable social networking site? (1)

idontusenumbers (1367883) | more than 4 years ago | (#31474036)

Due to scamming? What an accomplishment.

Re: (1)

clint999 (1277046) | more than 4 years ago | (#31474334)

I have been getting these emails for years, and I *always* knew it was a fake - I never logged on to actually see that it was a fake robot posting, because that would have been too depressing.I think probably everyone on this sight has enough experience with "popular" not to have fallen for this :-)If you did fall for it, well what a pathetic loser you are! :-)

Changing Times Indeed (0)

Anonymous Coward | more than 4 years ago | (#31474700)

The activitities of the robber barons sure have changed over the span of a century. Gone are the Rockefellers, the Carnegies, and the Vanderbilts as well as their great industrial empires from which did flow, directly or indirectly, much material prosperity. They have been replaced by the Internet shysters and their feeble realms of illusion from which emenates absolutely nothing.

I'd rather have yesterday.

Paying the lawyers... (1)

the_rajah (749499) | more than 4 years ago | (#31476394)

One hopes that the lawyers are paid in Classmate credits, too.
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