Last June, one of the most lucrative mileage promotions ever offered big mileage bonuses for purchasing web hosting and storage from a company called easyCGI through the US Airways and Hawaiian Airlines online shopping portals.
Back in mid-June, the US Airways mall had an offer from web hosting company EasyCGI for 4,757 miles per purchase. The offer had no restrictions on product specific purchases, length of service or quantity limits. It specifically said there were no restrictions.
Now, this didn’t seem like a mistake — there was a similar offer being made through the Hawaiian Airlines shopping mall for 7,269 miles per purchase with no restrictions.
But even though the Hawaiian mall was offering more miles, US Airways was the bigger deal — both because US Airways miles have more uses with more partners, and because US Airways was offering a 75% bonus on all mileage mall transactions made by Platinum and Chairmans Preferred members through the end of July. And US Airways sells ‘trial’ Platinum status. So it’s not hard to ‘buy up’ to Platinum to get the 75% bonus, and now the US Airways Mileage Mall offer with EasyCGI was 8,325 miles per transaction. (Do enough transactions and the $600 buy up Is worth it.)
The key here was that miles were being awarded per transaction. Members would sign up for an $11 monthly hosting account, and then could make additional transactions of $1.50 for monthly storage (or buy larger storage options for $4.50). And then they’d make additional $1.50 monthly storage transactions. Lots of them.
10 hosting accounts at $11 per month, and then 110 increments of monthly storage at $1.50 apiece would generate 1 million US Airways miles. Assume that you had to keep the hosting accounts open for 3 months, and your cost for the million miles would be ~ $825 (as a US Airways Platinum, or a little higher with Hawaiian, future million mile increments would be even less expensive since you already now have hosting accounts with EasyCGI and can just buy storage).
It cost less than $1000 to earn a million miles under the promotion. And similar deals were being offered on more than one shopping portal site.
The deal went south, with lots of finger pointing between easyCGI, the airlines, and the company running both shopping portal sites at the time FreeCause.
EasyCGI claimed that while they were incentivizing sales through an affiliate network, their terms didn’t allow incentives to be paid to customers (in the form of frequent flyer miles). FreeCause said that since EasyCGI wasn’t paying them, they weren’t going to pay the miles. And the airlines claimed they had no responsibility, it was up to FreeCause to honor the offer — that even though the shopping portals were called US Airways and Hawaiian Airlines, and marketing is done to the mailing lists of their frequent flyer programs, that when things don’t work out they claim not to have any involvement whatsoever.
The whole affair — and I didn’t know about the deal at the time, so wasn’t involved — made me think about the ‘mileage mall’ shopping portal in a totally different way.
As I pointed out a couple of months later, the defense being offered by shopping portals that it’s up to the merchants themselves to honor the offers that are marketing through these sites, creates perverse incentives to stick it to customers.
Taken literally, the position offered by both FreeCause and by Cartera Commerce is that members dealing with them are subject to the terms and conditions of merchants, terms and conditions that they aren’t a party to and are likely unaware of, and if the shopping portal does something contrary to those terms and conditions then it’s the member who gets nothing.
And to the extreme, a shopping portal could put out an offer intentionally, the member could follow instructions to the letter, and the shopping portal doesn’t consider itself obligated to anything if the offer they made doesn’t conform to the terms and conditions that the portal agreed to with the merchant.
And it’s all being done in the name of the mileage program, while they deny involvement.
As reported on Milepoint, some frequent flyers who didn’t have their mileage honored by these malls for their purchases of easyCGI web services have sued in Massachusetts court. The lawsuit can be found here (.pdf).
Apparently the miles at issue run into the nine figures — there’s a reference in the suit to 180 million miles and another reference to 200 million miles.
My guess as to what happened here, easyCGI probably meant to offer FreeCause a cetain amount of money for new customers rather than for any purchase. But what was advertised on the mileage mall sites was miles for any purchase at all, including cheap purchases of online storage.
EasyCGI wasn’t intending to pay more than once per customer and wasn’t intending to pay for small dollar purchases.
But somewhere along the line, that’s how the offer was presented. It was further advertised with no restrictions and specifically with no limit as to the number of miles that could be earned.
Payments were made, many orders later cancelled and refunded.
So the question is, does anyone have to honor an offer that’s made clearly where they take payment for purchases and a significant period of time passes?
This lawsuit apparently aims to find out, though I wonder whether we’ll ultimately see it litigated or if there will be a settlement, perhaps with a non-disclosure agreement in which case we may not find out.
Certainly an interesting read for any lawyers in the audience, or for frequent flyers who want to be able to rely on the offers that are presented to them on their favorite frequent flyer program’s website. That it’s come to a lawsuit certainly undermines that idea, that you can make a purchase and expect the frequent flyer program (in this case, US Airways and Hawaiian Airlines) to stand behind the offers made in their name.