PayPal's Honey faces class action lawsuit over affiliate commission practices
Content creators file lawsuit against PayPal's Honey browser extension for allegedly diverting affiliate commissions through cookie manipulation.
A class action lawsuit filed on December 29, 2024, alleges that PayPal's browser extension Honey systematically diverted affiliate commissions from content creators by manipulating tracking cookies during online purchases. The complaint, filed in the United States District Court for the Northern District of California, seeks damages exceeding $5 million.
According to the court documents, Wendover Productions LLC and Businessing LLC claim that Honey's browser extension replaces content creators' affiliate tracking cookies with its own at checkout, effectively redirecting commissions that would have otherwise gone to the original content creators. The lawsuit states this practice occurs even when Honey provides no discount codes to the consumer.
The plaintiffs, who together manage multiple YouTube channels with millions of subscribers, allege that PayPal's actions have damaged their business relationships with merchant partners. Wendover Productions operates several channels, including its main channel with 4.7 million subscribers, while Businessing LLC manages channels featuring content creator Ali Spagnola, who has approximately 2.25 million subscribers.
Matt Mullenweg, founder of WordPress, characterized the situation as "particularly egregious behavior" by PayPal in a social media post. The lawsuit comes just days after tech journalist MegaLag published findings from a multi-year investigation into Honey's practices.
The investigation revealed that when Linus Media Group, one of Honey's largest promotional partners, discovered this practice and requested changes, Honey declined to modify the behavior. This led to the termination of their partnership after approximately 160 sponsored segments that had garnered 194 million views.
The legal complaint outlines three specific mechanisms through which Honey allegedly diverts commissions: direct replacement of affiliate tracking cookies, incentivized diversion through the "Honey Gold" rewards program, and commission capture through interface elements like the "Got it" button.
The lawsuit's technical analysis explains that affiliate marketing typically operates on a "last click attribution" model, which credits the final touchpoint before purchase. The plaintiffs argue that Honey exploits this system by inserting itself as the last touchpoint during checkout, effectively erasing previous affiliate referrals.
Princess Polly, an Australian clothing retailer, disclosed in a company podcast that partner merchants retained control over which coupon codes appeared through the Honey platform. This meant users would only see merchant-approved codes through the extension, even if more valuable discounts existed elsewhere.
In one documented test case cited in the investigation, Honey diverted a $35 commission on a NordVPN purchase and instead provided the user with 89 cents worth of "Honey Gold" rewards points. The extension allegedly executed this diversion through a concealed browser tab that simulated a new referral click.
The plaintiffs seek class action status for all content creators affected by these practices from December 29, 2022, to the time of class certification. The lawsuit requests injunctive relief to stop Honey from replacing affiliate cookies, as well as monetary damages for the affected content creators.
A Better Business Bureau inquiry had previously examined Honey's advertising claims. According to the investigation, Honey discontinued certain claims for "business reasons" when questioned by the BBB.
The scope of Honey's influence in the creator economy has been substantial. Data analysis showed sponsorship of approximately 5,000 videos across 1,000 YouTube channels, accumulating 7.8 billion views. PayPal acquired Honey for $4 billion prior to these practices coming to light.
Rob Freund, a lawyer specializing in marketing and e-commerce issues, commented on social media that the lawsuit's claims appear to have merit, suggesting potential legal consequences for PayPal's alleged practices.