A spate of new Bay Area class action lawsuits accuse San Jose’s PayPal Inc. of using “honey,” not to attract flies, but to steal commissions for online sales that are properly due to influencers and affiliate marketers.
Seven class action cases have been filed in federal court in San Francisco since late December, all asserting that PayPal’s coupon-finder app, PayPal Honey, generally called Honey, has fraudulently helped itself to commissions that were due to the plaintiffs.
A request to lawyers for PayPal to comment on the cases was not immediately acknowledged.
The lawsuits followed an investigative story that appeared Dec. 21, 2024 on a YouTube podcast by a New Zealand-based blogger using the name MegaLag. The bombastic and entertaining 23-minute video segment claimed that what Honey is doing might be “the greatest influencer scam of all time.”
The first of the class actions — Wendover Productions LLC v. PayPal Inc. — was filed within days of the podcast and many of the subsequent suits reference the podcast in their court filings.
The lawsuits explain that Honey is a popular browser “extension” that can be downloaded for free and, when installed in Chrome, Safari, Firefox or another browser, will scour the internet for “coupon codes” that allow a consumer to obtain a discount on an online purchase.
Honey advertises that users can avoid the problems of manually searching for coupons — a process it says can be cumbersome, inefficient and often unsuccessful. Honey says that it will automatically “search for the internet’s best coupons” and seamlessly apply the “one with the biggest savings to your [shopping] cart.”
Honey’s pitch to the consumer is that having the extension is “like free money” because the consumer doesn’t need to do anything and will still feel confident that if there is an advantageous coupon anywhere out there, Honey’s sticky fingers will grab it and apply it to the purchase.
The lawsuits explain that if Honey is installed on a consumer’s computer or mobile device, it works in the background until it appears at the time of a purchase as a pop-up in the consumer’s online shopping cart. The pop-up window says that Honey has found coupons applicable to the purchase. The consumer is then urged to click a red button that says “Apply Coupon,” which then applies the best coupon to the sale, automatically saving the consumer money.
The class actions are brought by content creators — online influencers, affiliate marketers, podcasters, and others who use their internet platforms (YouTube, Instagram, TikTok, etc.) to recommend goods or services to their followers. The creators have contractual arrangements with online merchants who promise a commission when a creator’s recommendation results in a sale.
Under the hood of the internet, there is a system that is used to determine which creator is entitled to a commission. The merchant provides the creator with a special link that the creator uses when it recommends the product to its followers. When a consumer uses that link to make a purchase, the creator’s identifying information is recorded in a tag or cookie that the merchant uses to attribute the required commission to the creator.
Of course, the shopping behavior of consumers is not always so straightforward. Customers may follow a link to a seller but then go elsewhere and return after a different creator also recommends the product. To make sure that there clarity as to who gets the commission, according to the plaintiffs, the industry follows a “last click” attribution system that awards the commission to the last recommender.
The lawsuits allege that because Honey is essentially the last step in the purchase process, it is uniquely situated to secure the commission. Plaintiffs say that when Honey says it has found a discount coupon and the consumer clicks the “Apply Coupon” button, Honey’s identification information is automatically substituted for the creator’s. That means Honey is identified as the last click and gets the commission.
The lawsuits say that in many cases, Honey does not actually find an active coupon code that reduces the sale price, and they allege that in that situation, Honey still substitutes itself for the content recommender and gets the commission anyway. The lawsuits contend the practice is fraudulent. Several of the plaintiff lawyers describe Honey’s practice as “commission theft.”
Lyon Fitness LLC, the plaintiff in a case filed in San Francisco on Tuesday, alleged, “Hundreds of thousands of hardworking online influencer marketers who rely on commissions for their livelihoods have lost millions of dollars because of the Honey browser extension.”
PayPal acquired Honey in 2020 for $4 billion. At that time, Honey had 17 million active users.
The class action cases have not yet been assigned to a single judge but if they follow the usual practice, according to Josh Sanford, one of the plaintiffs’ lawyers in the Wendover case, it is likely that over the next couple of months, the Wendover case will be treated as the “host case” and the other cases determined to be “related” to it.
If that is the case, it is likely that Wendover and the related cases will be handled by a single judge to save time and promote efficiency.
U.S. District Judge Beth Labson Freeman, the judge assigned to the Wendover case, has before her a pending motion to relate several of the other class actions to the Wendover case. Freeman has not yet ruled on that matter.
The plaintiffs’ claims raise many novel questions about the relationships among Honey, the creators, and the merchants, but what is particularly noteworthy is the plaintiffs’ alleged surprise to discover what was happening.
Sanford said that his clients were not aware of what Honey was doing and added “that I would be shocked if it were not true for almost every creator.”
He credited the MegaLag podcast with exposing the practice. According to the YouTube platform, the video has been viewed 16 million times since it was initially posted.
Sanford said that when the video went viral, it “kind of precipitated all of this.”
He added, “we are in a new world where online truly independent investigative journalists become the sparks that ignite litigation.”