A federal judge dismissed affiliate marketers’ lawsuit against PayPal over its Honey browser extension, but granted leave to amend, finding plaintiffs failed to establish they lost commissions entitled to them under their merchant contracts. The November 21 ruling gives content creators 45 days to strengthen their case that Honey’s “cookie stuffing” practices diverted rightful earnings from influencers who drive consumer purchases.
The lawsuit, filed by affiliate marketers including attorney and YouTuber Devin Stone, alleged that Honey’s browser extension diverts affiliate commissions by replacing creators’ tracking codes with its own during consumer checkout processes.
U.S. District Judge Beth Labson Freeman found the First Amended Complaint (FAC) did not contain “any allegations at all about the terms of Plaintiffs’ agreements with the merchants,” making it impossible to determine whether creators were actually entitled to the disputed commissions under their contracts.
The court noted that plaintiffs “cannot establish a cognizable injury by conclusorily alleging that they were denied commissions due to them under an industry standard when the FAC alleges that the commissions were due under their contracts with the merchants.”
How Affiliate Marketing Attribution Works
The case centers on “last click attribution,” the predominant method used in affiliate marketing where “the Affiliate Marketer who provided the last affiliate link used prior to purchase gets credit for the sale,” according to court documents.
When consumers click affiliate links, tracking codes containing unique identifiers are stored on their browsers for a set period. These codes track purchasing activity and assign commissions to the referring creator.
Plaintiffs alleged that when consumers with Honey installed engage with the extension at checkout, it “surreptitiously creates a hidden tab, iframe, or refresh that reloads the Merchant’s website that replaces Plaintiffs’ affiliate links with PayPal’s own affiliate link.”
Court Distinguishes Similar Case
Judge Freeman distinguished the case from a recent ruling in the Eastern District of Virginia involving Capital One Shopping, where plaintiffs successfully established standing by citing specific contract terms.
In that case, “the merchants’ agreements cited in the Complaint demonstrate that Plaintiffs are entitled to the commission once a consumer (i) navigates to the merchant’s website through the Plaintiffs’ affiliated link, (ii) does not subsequently navigate to the website through another affiliate link, and (iii) makes a purchase.”
The Honey lawsuit lacked such specific contractual allegations.
The court also raised concerns about the plaintiffs’ Computer Fraud and Abuse Act (CFAA) and California Comprehensive Computer Data Access and Fraud Act claims.
The complaint acknowledged that when consumers download Honey, “the installation process grants Honey an extensive set of ‘permissions'”, including the ability to query and modify cookies, observe web traffic, execute scripts, and store consumer data.
Judge Freeman noted that both statutes require plaintiffs to demonstrate defendants acted “without authorization or exceeded its authorization,” but the complaint admits consumers granted Honey broad permissions.
The court cited the Supreme Court’s decision in Van Buren v. United States, which clarified that CFAA “does not attach to authorized uses of computer databases even when a defendant had ‘obtained information from the database for an improper purpose.'”
Additional Claims Face Hurdles
The court identified deficiencies in several other claims. The unjust enrichment claim failed to demonstrate that the plaintiffs lacked adequate legal remedies or that they were entitled to commissions under contracts with merchants rather than from Honey directly.
Business tort claims for tortious interference also failed because “the FAC does not allege that PayPal actually received any commissions from Merchants that were otherwise due to Plaintiffs.”
The negligent interference claim failed because the plaintiffs did not allege any duty of care owed by PayPal to them.
PayPal’s Position
PayPal, which acquired Honey for $4 billion in 2020, maintains that “Honey follows industry rules and practices, including last-click attribution.”
The company previously stated it “disagrees with the claims in these lawsuits and looks forward to defending ourselves.”
Path Forward for Creators
Stone reported that more than 1,000 creators had expressed interest in joining the class action.
“What we think Honey is doing is interjecting itself and replacing or stealing affiliate commissions from creators that sent traffic to an online store. We think it is violative of several different laws,” Stone said in an appearance on The Wall Street Journal’s “The Journal” podcast.
Judge Freeman’s order allows plaintiffs to file an amended complaint addressing the standing and authorization issues, but prohibits adding new claims or parties without court permission.
The affiliate marketing industry reportedly generates approximately $12 billion in U.S. revenue annually, with more than $1 billion going to social media creators.
Dragomir is a Serbian freelance blog writer and translator. He is passionate about covering insightful stories and exploring topics such as influencer marketing, the creator economy, technology, business, and cyber fraud.
A federal judge dismissed affiliate marketers’ lawsuit against PayPal over its Honey browser extension, but granted leave to amend, finding plaintiffs failed to establish they lost commissions entitled to them under their merchant contracts. The November 21 ruling gives content creators 45 days to strengthen their case that Honey’s “cookie stuffing” practices diverted rightful earnings from influencers who drive consumer purchases.
The lawsuit, filed by affiliate marketers including attorney and YouTuber Devin Stone, alleged that Honey’s browser extension diverts affiliate commissions by replacing creators’ tracking codes with its own during consumer checkout processes.
U.S. District Judge Beth Labson Freeman found the First Amended Complaint (FAC) did not contain “any allegations at all about the terms of Plaintiffs’ agreements with the merchants,” making it impossible to determine whether creators were actually entitled to the disputed commissions under their contracts.
The court noted that plaintiffs “cannot establish a cognizable injury by conclusorily alleging that they were denied commissions due to them under an industry standard when the FAC alleges that the commissions were due under their contracts with the merchants.”
How Affiliate Marketing Attribution Works
The case centers on “last click attribution,” the predominant method used in affiliate marketing where “the Affiliate Marketer who provided the last affiliate link used prior to purchase gets credit for the sale,” according to court documents.
When consumers click affiliate links, tracking codes containing unique identifiers are stored on their browsers for a set period. These codes track purchasing activity and assign commissions to the referring creator.
Plaintiffs alleged that when consumers with Honey installed engage with the extension at checkout, it “surreptitiously creates a hidden tab, iframe, or refresh that reloads the Merchant’s website that replaces Plaintiffs’ affiliate links with PayPal’s own affiliate link.”
Court Distinguishes Similar Case
Judge Freeman distinguished the case from a recent ruling in the Eastern District of Virginia involving Capital One Shopping, where plaintiffs successfully established standing by citing specific contract terms.
In that case, “the merchants’ agreements cited in the Complaint demonstrate that Plaintiffs are entitled to the commission once a consumer (i) navigates to the merchant’s website through the Plaintiffs’ affiliated link, (ii) does not subsequently navigate to the website through another affiliate link, and (iii) makes a purchase.”
The Honey lawsuit lacked such specific contractual allegations.
Authorization Questions Complicate Computer Fraud Claims
The court also raised concerns about the plaintiffs’ Computer Fraud and Abuse Act (CFAA) and California Comprehensive Computer Data Access and Fraud Act claims.
The complaint acknowledged that when consumers download Honey, “the installation process grants Honey an extensive set of ‘permissions'”, including the ability to query and modify cookies, observe web traffic, execute scripts, and store consumer data.
Judge Freeman noted that both statutes require plaintiffs to demonstrate defendants acted “without authorization or exceeded its authorization,” but the complaint admits consumers granted Honey broad permissions.
The court cited the Supreme Court’s decision in Van Buren v. United States, which clarified that CFAA “does not attach to authorized uses of computer databases even when a defendant had ‘obtained information from the database for an improper purpose.'”
Additional Claims Face Hurdles
The court identified deficiencies in several other claims. The unjust enrichment claim failed to demonstrate that the plaintiffs lacked adequate legal remedies or that they were entitled to commissions under contracts with merchants rather than from Honey directly.
Business tort claims for tortious interference also failed because “the FAC does not allege that PayPal actually received any commissions from Merchants that were otherwise due to Plaintiffs.”
The negligent interference claim failed because the plaintiffs did not allege any duty of care owed by PayPal to them.
PayPal’s Position
PayPal, which acquired Honey for $4 billion in 2020, maintains that “Honey follows industry rules and practices, including last-click attribution.”
The company previously stated it “disagrees with the claims in these lawsuits and looks forward to defending ourselves.”
Path Forward for Creators
Stone reported that more than 1,000 creators had expressed interest in joining the class action.
“What we think Honey is doing is interjecting itself and replacing or stealing affiliate commissions from creators that sent traffic to an online store. We think it is violative of several different laws,” Stone said in an appearance on The Wall Street Journal’s “The Journal” podcast.
Judge Freeman’s order allows plaintiffs to file an amended complaint addressing the standing and authorization issues, but prohibits adding new claims or parties without court permission.
The affiliate marketing industry reportedly generates approximately $12 billion in U.S. revenue annually, with more than $1 billion going to social media creators.
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