Honey browser extension accused of scamming customers

YouTuber exposes Honey as "biggest marketing scam of the century"

Honey, a free browser extension that helps users find and apply online shopping discounts, is under fire for alleged deceptive practices harming both consumers and content creators.

The service, acquired by PayPal for $4 billion in 2020, faces accusations from YouTuber MegaLag, who claims that Honey fraudulently intercepts affiliate links used by influencers and replacing them with its own tracking codes.

MegaLag also claims that, contrary to its promise of finding the best discounts for consumers, Honey applies pre-selected discount codes from its business partners.

This means consumers might miss out on better savings available elsewhere.

Before posting the video on December 21, the Honey extension had more than 20 million users, according to the Chrome Web Store. Now, roughly 2 million users have uninstalled.

"I'm confident this could be the biggest influencer scam of all time," MegaLag declared in the first installment of a three-part YouTube series.

What is affiliate marketing?

Affiliate marketing is a model where businesses pay commissions to affiliates - such as influencers, bloggers, or websites - for driving sales or leads.

Influencers promote products using unique links that track referrals. When a consumer clicks this link and buys something after seeing something they like in a video, the content creator earns a commission.

How is Honey allegedly exploiting it?

MegaLag's video, which has already garnered 16 million views, reveals how Honey allegedly exploits affiliate links in three ways:

Replacing affiliate links at checkout:  When a consumer clicks on an affiliate link they go to the website and add a product to their cart.

But just before you check out, Honey pops up, offering to apply discount coupons.

If the consumer clicks 'apply discount', Honey replaces the original affiliate link with its own, ensuring that Honey-not the influencer-earns the commission.

This is said to occur even if no discount codes are successfully applied.

PayPal Rewards (formerly Honey Gold): Honey also allegedly diverts commissions through its cashback scheme.

When a consumer shops with a business partnered with PayPal Rewards and uses the Honey extension, Honey takes the commission and shares a small portion with the consumer as reward points.

For example, MegaLag tested this with a NordVPN subscription. Using his affiliate link earned him US$35, but using Honey provided just US$0.89 cashback, with most of the commission presumably going to PayPal.

Commission without coupons:  Megalag also argues that Honey earns commission even when it doesn't find any coupon codes.

In such cases, it still overrides the original affiliate link if a button has been clicked on, ensuring it takes credit for the sale.

With popular YouTubers generating billions of views, the potential losses could be a hefty sum.

"I believe this scam has likely cost content creators millions of dollars," claims MegaLag.

How Honey allegedly misled consumers

The accusations against Honey go beyond affiliate marketing fraud, with claims that the popular browser extension fails to deliver on its core promise of finding the best discounts online.

MegaLag explains: "When I reached the checkout page, it couldn't find me any discount codes. Yet when I searched manually, I found working codes...  Even when Honey did find me a code, I was often able to find another code of better value."

According to the New Zealand YouTuber, this occurs because stores partnering with Honey are allegedly given "full control" over what discounts appear on the platform.

This raises questions about Honey's dual role. To consumers, it markets itself as a free tool that scours the internet for the best deals. Yet for businesses, it offers a platform to promote pre-approved discounts-potentially steering users away from better savings available elsewhere.

Honey's terms and conditions acknowledge these limitations, stating that the extension "may not always find you the best deal" and is "not responsible" for missed rewards opportunities.

The Australian Competition and Consumer Commission (ACCC), Australia's consumer watchdog, declined to confirm whether it has received complaints about Honey or launched an investigation. However, an ACCC spokesperson told Money:

"The ACL (Australian Consumer Law) requires businesses supplying goods or services to Australian consumers not to engage in misleading or deceptive conduct. The failure to disclose or omit relevant information can be misleading or deceptive."

PayPal responds to class action

In response to the video, PayPal chief corporate affairs and communications officer Amy Bonitatibus responded to USA TODAY about the allegations:

"Honey is free to use and provides millions of shoppers with additional savings on their purchases whenever possible. Honey helps merchants reduce cart abandonment and comparison shopping while increasing sales conversion."

Bonitatibus said that Honey follows industry rules and practices, including last-click attribution, tracking codes that identify which affiliate had the customer's last click before purchasing.

In a further development, another YouTuber, Legal Eagle, has filed a class-action lawsuit against PayPal in a California court.

The lawsuit alleges that the company systematically diverts affiliate commissions from rightful earners, undermining the affiliate marketing ecosystem. Legal Eagle is now calling on other creators affected by the alleged scam to join the lawsuit.

In a statement, a spokesperson for PayPal said the company disputes the allegations and would "defend against them vigorously".

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