Why is Honey getting sued? LegalEagle class-action PayPal lawsuit explained

YouTube lawyer LegalEagle announced that he organized a class-action lawsuit alongside several other attorneys to give creators the opportunity to sue Honey. But what are they suing the PayPal-owned company for?

On its surface, Honey just seems like a couponing service. It’s advertised as an application that will skim coupon codes for online vendors, finding the user the best deal possible and giving them the lowest price possible on a purchase.

However, accusations made by multiple YouTubers claim that the service isn’t working as intended in several ways, leading to Honey allegedly pocketing affiliate link money from every purchase made through the app or extension.

As a result, they’re being sued in a class-action lawsuit organized by lawyer and YouTuber LegalEagle. Here’s what you need to know.

Why is Honey being sued? Affiliate code “scam” explained

MegaLag is the person who raised many of the allegations against Honey, though he wasn’t the first to suspect something was going on with Honey’s affiliate linking. LinusTechTips severed ties with the company years ago, along with several other creators, but none of them were vocal about why other than vaguely saying they had issues with the way the company’s affiliate linking worked.

But, with MegaLag explaining how Honey’s browser extension allegedly works in his video, the floodgates have opened. Millions of people have disabled the extension on Google applications and devices, with the app going from 20 million users to 17 million since his video was published.

In short, MegaLag alleged that Honey overwrites any affiliate link with its own, even including the links of creators they partner with. He also claimed that Honey worked with vendors to manipulate which coupons were put in front of users, purposely giving them deals curated by the vendor rather than the actual best prices.

MegaLag

After these findings, the YouTuber labelled the application a “scam”. However, LegalEagle explained this further and, in putting together a lawsuit, has alleged that Honey lost YouTubers other sponsor opportunities as well.

He spoke about the extension as if it was an infection, a “sleeping leech” waiting for someone to click an affiliate code. When creators partner with a product and get an affiliate link to sell that product, they typically will be given a quota to measure how successful that campaign was. The affiliate link they’re given tracks how many people are driven to buy or try a product based on their advertisement.

LegalEagle explained that, if Honey works in the way that both he and MegaLag are accusing them of, a user downloading Honey based on their favorite creator’s recommendation could lead to that same person unwittingly giving every other affiliate link they ever click to Honey as well.

So, if they bought another product based on a recommendation from that creator, they’d click the affiliate link to buy it only for Honey to pocket the money and deprive the original YouTuber of payment and credit for the sale, devaluing every partnership that creator makes.

It’s based on those accusations that LegalEagle and several other attorneys have filed a class-action lawsuit against Honey and, by extension, PayPal. They aim to get creators back the money they feel was stolen from them.

LegalEagle pursuing possible billions of dollars from Honey

In order to work with creators, LegalEagle filed this as a class-action suit specifically to allow other creators to get in on it. The suit, titled Wendover Productions, LLC v. PayPal inc., was filed on January 2, and you can read our article on that initial filing for more info about the suit and LegalEagle’s personal goals with it.

The lawsuit itself is lengthy, as it details the process in which Honey allegedly stole from creators and retreads a lot of similar information to what was presented in MegaLag’s video. And, seeing as it’s a class-action suit, LegalEagle urged creators to get involved by signing up at honeylawsuit.com.

However, further down in the suit, it outlines what they believe to be the impact on creators and marketers. This information is unique to the suit and, though LegalEagle touched on the topic in his video, there’s more to wean from the suit itself.

The suit is pursuing damages from 5 core areas: Intentional Interference with Contract Relations, Intentional Interference with Prospective Economic Relations, Unjust Enrichment, Violation of California’s Unfair Competition Law, and Conversion. This is followed by an in-depth description of what they believe Honey is doing to wrong creators and businesses.

First, here’s an excerpt about the possible impact of what Honey’s being accused of doing:

• Through these deceptive practices, PayPal systematically diverts commissions from rightful earners, undermining the affiliate marketing system. Adding to the irony, PayPal enlists content creators and influencers to promote the Honey browser extension to their audiences, effectively enabling it to usurp the commissions and other benefits those same creators depend on for income.
• Defendant designed its Honey browser extension to take credit for customer acquisition for which it is not responsible and for which, were the Honey browser extension not in place, Plaintiffs would be properly credited.
• In addition to taking the direct and indirect benefits that Plaintiffs would have received by stealing the affiliate attribution, Defendant’s actions have damaged Plaintiffs’ relationships with business partners.
• Defendant’s actions have caused Plaintiffs to receive less favorable contract terms from their business partners and/or led to a failure to renew contracts between Plaintiffs and their business partners.

This is just a small portion of what the suit accuses Honey of, with it alleging that the company damaged creators’ relationships with business partners and their direct income in numerous ways.

Honey

Honey’s been in hot water after YouTuber MegaLag made a video claiming they were stealing from creators and consumers

These accusations were followed by a section titled “PayPal’s Extensive Records of Their Actions” that outlines how the suit will try and figure out which transactions went through Honey and award damages. It’s got three main points:

• Consumer shopping data is extremely valuable to tech companies such as PayPal. As a result, Defendant PayPal keeps extensive records of every transaction completed using Honey.
• For every completed Honey transaction, PayPal records (in a searchable database), among other things: the exact time and date, store, user ID, device ID, visitor ID, session ID, referrer URL, first referrer URL, location (including city and country), browser, and client.
• In other words, PayPal knows exactly whose affiliate attribution they replaced and when and how they replaced it.

For those wondering how this lawsuit, if won by the side of Wendover Productions and the class involved, would be paid out, this is it. LegalEagle’s suit claims that PayPal should have information stored on every transaction that the affiliate links were allegedly swapped out for, providing them a way to figure out which transactions were meant to go through Honey and which weren’t.

What’s more, if PayPal and Honey weren’t working in the way that they’ve been accused of, these records would provide a way for the company to prove their innocence and a path toward successfully defending themselves from the suit.