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Influencers are suing financial giant PayPal in two class-action lawsuits filed this week. The content creators separately alleged that the company's browser extension Honey, which searches for coupons around the web, took affiliate commissions away from them by improperly claiming credit for driving sales.
A spokesperson for Honey said the company disputes the allegations in the lawsuits and would defend against them vigorously.
The lawsuits ask the US District Court in Northern California to consider what's fair play in the cutthroat world of affiliate marketing. It's a major business that drove about 20% of US e-commerce revenue on Cyber Monday, according to Adobe Analytics.
Affiliate marketing is a practice in which YouTubers and other content creators earn a commission if they inspire a purchase. Honey similarly earns money through affiliate commissions, getting paid if a user clicks on its browser extension to search for a coupon or deal before buying.
The referrer who actually gets paid the commission — and it's generally only one — is determined by a mix of links, browser cookies, and other tags that indicate the final source of referral, a practice known as last-click attribution. In short, the last click wins.
"Honey follows industry rules and practices, including last-click attribution, which is widely used across major brands," the Honey spokesperson said.
In the lawsuits, the plaintiffs allege that Honey would take credit for driving online sales it didn't actually help with. The suits say that even if Honey couldn't find a coupon, it would get the last click, sometimes taking it away from a content creator who had linked to a product.
"In its simplest form, Honey is not providing benefits that they say they're providing, and they are basically saying to online retailers that they were responsible for a referral for a sale when they are not," Devin Stone, a counsel for one of the plaintiffs who also runs the YouTube channel LegalEagle, told Business Insider.
The Honey spokesperson said the extension helps "millions of shoppers with additional savings on their purchases whenever possible" while helping merchants "reduce cart abandonment and comparison shopping."
The plaintiffs are seeking damages as well as injunctive relief, a measure that would require Honey to change its affiliate practices. If the lawsuits are certified as class action, other creators who believe their affiliate businesses were harmed by Honey could also sign on to the suits.
But it may be tough for creators to prove that Honey is doing anything unlawful by taking credit for driving sales, said Robert Freund, an advertising and e-commerce lawyer. PayPal could argue that Honey is driving final sales even in instances when it fails to offer a discount coupon. And because it's a browser extension, it's often going to be the last click a user makes before purchasing.
"The difficulty there for the plaintiffs is you're essentially trying to make the system of last-click attribution for affiliates unlawful," Freund told BI. "I can understand why a creator affiliate would think that it's unfair, but I don't know that it's illegal."
"I don't think it's a frivolous case by any means, but there's certainly some challenges ahead for the plaintiffs," he added.
Even if Honey prevails in getting the lawsuits dismissed, it may have to adjust its practices in order to make peace with the creator community. The company works with a lot of influencers to advertise its product and could lose a large chunk of that marketing channel if creators believe it's damaging their affiliate businesses.
Honey has been under fire in the creator community since December 21, when YouTuber MegaLag posted a video that criticized the company's affiliate marketing practices.
Since then, other prominent creators like Marques Brownlee and Hank Green have spoken out against the extension.
