According to a recent complaint, one of Silicon Valley’s most recognizable software businesses is taking advantage of internet influencers who profit from online product promotion.
In a video this week, tech influencer Marques Brownlee, who has nearly 20 million YouTube subscribers, stated that it features nearly every well-known creative that comes to mind, including me.
Five online content firms representing influencers filed a class-action lawsuit in San Jose U.S. District Court on Thursday, alleging that San Jose tech giant PayPal utilizes dishonest and covert tactics to steal money from social media influencers and other online content creators.
According to the lawsuit, thousands of content creators have been defrauded of millions of dollars in creator commissions that were diverted to PayPal through fraudulent business methods.
PayPal’s free Honey internet-search browser extension is in question; according to the firm, it will search the internet for the greatest deals and apply them to purchases made online. According to the Google Chrome online store, Honey has 17 million users.
PayPal, which paid $4 billion to acquire Honey in 2020, stated in a statement that it denied the lawsuit’s allegations but did not respond to specific queries from this news outlet on Friday.
According to PayPal, Honey is free to use and offers millions of customers extra discounts on their transactions whenever feasible. Honey complies with industry standards and procedures.
A tech journalist YouTuber who exposed the lawsuit in mid-December shows a number of well-known social media influencers, including MrBeast, who is arguably the biggest influencer celebrity in the world, promoting Honey to millions of viewers online with claims like, “Honey will find every working code on the internet and apply the best one to your cart.”
In the meanwhile, many influencers engage in a practice known as affiliate marketing, whereby they recommend things to their audience and receive paid when a viewer purchases one of those products through a link the influencer offers.
However, the lawsuit claimed that when a discount-hungry viewer who has installed Honey uses an influencer’s product link to make a purchase and then clicks on Honey to look for discount codes, the extension transfers credit for the transaction to PayPal, enabling the $87 billion stock market company to steal the influencer’s commission.
According to the lawsuit, this kind of theft can happen even when Honey informs a customer that there are no coupons available, but they nevertheless purchase the item.
According to the lawsuit, PayPal also provides Honey Gold, a program that gives users PayPal Rewards points that may be redeemed for gift cards. However, the lawsuit claimed that PayPal may steal a $35 commission that ought to have gone to the artist when a customer receives points worth less than a $1 from a purchase.
While the lawsuit does not allege online shoppers were defrauded, the practices PayPal is alleged to have engaged in could undermine the foundations of online shopping, said Josh Sanford, a lawyer for the plaintiffs.
Everyone benefits from PayPal’s expansion of the e-commerce industry, according to Sanford. But if the accusations turn out to be accurate, he said, they will have made e-commerce more difficult since it reduces the trust between buyers and sellers and the confidence that both parties are aware of the terms of the transaction.
According to the lawsuit, all five of the content-creation businesses suing PayPal profit from online product sales.
According to the lawsuit, Businessing, a Los Angeles-based corporation, runs multiple YouTube channels for musician and artist Ali Spagnola. One of these channels has 2.25 million followers. One of the educational YouTube channels run by Colorado-based Wendover Production has 4.7 million members. Opera soprano Elizabeth Zharoff developed The Charismatic Voice of Arizona, which has almost 2 million subscribers and provides resources for professional and aspiring vocalists. Zharoff has sung at Palo Alto’s West Bay Opera. Nevada-based Clearvision Media creates instructional video for online content producers; one of its channels boasts over 3 million users. More than 400,000 people subscribe to the founder Andru Edwards’ YouTube channel, Gear Live Media, which is situated in Washington and covers technology and gadgets.
Wendover and Businessing were the sole plaintiffs in the initial draft of the complaint, which was submitted on December 29.
In the amended complaint, which was filed on Thursday, PayPal was charged of unfairly benefitting itself and meddling in financial transactions and contracts. To attract thousands of other artists, the content makers are seeking a court ruling that would grant them class-action status. They are seeking unspecified damages and a court order banning PayPal from its alleged diversion of commissions from online sales.
Brownlee had this advice for YouTube viewers: Uninstall Honey, Brownlee said. Warn people not to install Honey.
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