Online influencers who make money off promoting products online are getting played by one of Silicon Valley’s iconic technology companies, a new lawsuit claims.
“It involves almost every high-profile creator that I can think of, including myself,” tech influencer Marques Brownlee, who has almost 20 million subscribers on YouTube, said in a video this week.
San Jose tech giant PayPal uses “deceitful and clandestine” methods to steal money from social media influencers and other creators of online content, the class-action lawsuit filed Thursday in San Jose U.S. District Court by five online-content companies representing influencers alleged.
Thousands of content creators allegedly have fallen victim to what the lawsuit described as “fraudulent business practices” involving the diversion of millions of dollars in creators’ commissions to PayPal.
At issue is PayPal’s free Honey internet-search browser extension that the company claims will scour the web for the best discount coupons and apply them to online purchases. Google’s Chrome web store shows Honey has 17 million users.
PayPal, which bought Honey in 2020 for $4 billion, did not answer detailed questions Friday from this news organization but said in a statement that it disputed the lawsuit’s claims.
“Honey is free to use and provides millions of shoppers with additional savings on their purchases whenever possible,” PayPal said. “Honey follows industry rules and practices.”
A mid-December video exposé by a tech-journalist YouTuber that led to the lawsuit shows a series of high-profile social media influencers — including MrBeast, arguably the world’s biggest influencer celebrity — hyping Honey online to millions of viewers with statements such as, “Honey will find every working code on the internet and apply the best one to your cart.”
Many influencers, meanwhile, recommend products to their viewers and get a payment when a viewer buys one of those products — via a link the influencer provides — in a process known as “affiliate marketing.”
But when a discount-hungry viewer who has installed Honey uses an influencer’s product link to buy something and then clicks on Honey to seek discount codes, the extension diverts credit for the sale to PayPal, allowing the company — valued at $87 billion in the stock market — to steal the influencer’s commission, the lawsuit alleged.
Such theft can occur even when Honey tells a shopper no coupons are available, but they buy the product anyway, the lawsuit claimed.
PayPal also offers Honey Gold, a system that awards consumers PayPal Rewards points redeemable for gift cards, the lawsuit noted. However, when a shopper gets points worth a small amount — even less than a dollar — from a purchase, PayPal may snatch a $35 commission that should have gone to the creator, the lawsuit alleged.
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.
“PayPal has grown the world of e-commerce, which is great for everyone,” Sanford said. However, he said, “if the allegations are born out as true, they’re going to have made e-commerce harder because it makes vendors and consumers less able to trust each other and less confident that they understand the terms of their transaction.”
The five content-creation companies suing PayPal all make money from sales of products they promote online, the lawsuit said.
Los Angeles company Businessing operates several YouTube channels for artist and musician Ali Spagnola, with one channel having 2.25 million subscribers, the lawsuit said. Wendover Production of Colorado has several educational YouTube channels, one with 4.7 million subscribers. The Charismatic Voice, of Arizona, with nearly 2 million subscribers, was founded by opera singer Elizabeth Zharoff — who has performed at Palo Alto’s West Bay Opera — and offers resources for aspiring and professional vocalists. Clearvision Media of Nevada produces educational content for online creators, with one of its channels having more than 3 million subscribers. Washington-based Gear Live Media covers tech and gadgets, with more than 400,000 people subscribing to founder Andru Edwards’ YouTube channel.
A first version of the lawsuit, filed Dec. 29, included only Wendover and Businessing as plaintiffs.
The updated lawsuit filed Thursday accused PayPal of interfering in contracts and financial dealings and unjustly enriching itself. The content creators want a court order granting class-action status in order to bring in thousands of other creators. 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.”
