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        Feb. 24, 2003 Eric Arnum, Editor       
 

Extended Warranty Deception:

Two companies misuse the power of the Web to set their bait for unsuspecting auto warranty shoppers

by Eric Arnum, Editor

By all accounts, the market for automobile extended warranties is hotly contested, with everyone in search of a competitive advantage over their peers. But at least one company and one of its affiliates have gone way above and beyond the call of duty, creating a web of deceptive content, false claims, misleading addresses, and misused trademarks designed to ensnare innocent World Wide Web users in search of honest advice.

WarrantyByNet Inc. of Brick NJ is the company, and KayeTech Systems of Apopka FL is the affiliate. At least we assume it is an affiliate. On Feb. 20, when Warranty Week asked Evan Gartenberg, WarrantyByNet's director of business development, whether he was aware of what KayeTech Systems and/or its owner David Kaye were doing in his company's name, he replied, "I don't really know anything about those."

Was there any contractual relationship between David Kaye and WarrantyByNet? "Not as far as I know," Gartenberg asserted, although he conceded there might be something going on that he didn't know about. "I'm just one person here. So I don't know who does what here. I could check. I don't know everything here."

He then suddenly remembered he was late for a meeting, and promised to call us back soon with the correct information. We're still waiting.

Efforts to elicit comment from David Kaye proved to be equally unproductive. His company has a Web site that avoids using his name, provides no contact phone or fax numbers, and includes just one email address: makeit@mailshell.com.

Messages to that address and others such as postmaster@kayetech.com finally produced a response in the form of a short email: "Iím just curious why youíre asking questions about my affiliate relationship with WarrantyByNet?"

That's as close as we've come so far to a confirmation that indeed these people do know each other. However, if a late-arriving response does appear, we'll splice it right here into the online edition of this article, which will remain posted in the Warranty Week document library.

Deceptive URLs & Keywords

What KayeTech and WarrantyByNet have done is to each create a family of identical and interwoven Web pages that ensnare the Web user through their clever use of keywords in the page's address, also known as the URL.

WarrantyByNet's family of 12 mirror Web sites each combined the make of an automobile with the word warranty, as in audiwarranty.net or fordwarranty.net. What was on each page was some copy designed to entice the reader into offering personal information about themselves in return for a free rate quote. See our mirror page for an example of what the home page of each of the 12 sites contained.

The actual Web sites were taken down some time in the weeks immediately after initial publication of this article on Feb. 24, 2003, but the domain name registration records will persist in the registrar's database until at least May 2003, when the 12 registrations are either renewed or expire.

KayeTech's family of 20 nearly identical sites are named using permutations of the words auto, extended, and warranty. Then KayeTech takes a few extra steps by including false statements and unsupported claims designed to deceive the human reader, plus a long list of keywords and invisible links designed to deceive a mechanical search engine.

Briefly, what we've found can be grouped into five topic headings:

  1. KayeTech's pages list an outdated A.M. Best rating for WarrantyByNet's reinsurance underwriter.
  2. KayeTech's pages include possible exaggerations or unsupported claims.
  3. These are "advisortisements," advertisements posing as advice columns.
  4. KayeTech is "spamdexing" the search engines in hopes of getting higher rankings.
  5. WarrantyByNet's mirror sites may infringe upon the trademarks of automakers.
Warranty Week found at least 20 auto buying advice Web sites registered by David Kaye that contain factual errors along with boasts, assertions, and claims that are at best unsupported, and at worst simply untrue. We also found at least 12 mirror sites posted by WarrantyByNet that include the trademarked brand names of popular automobiles in their titles, seemingly for no other reason than to capture the eyeballs of people in search of an automaker's warranty Web site.

Kaye's automotive advice sites include:


The Whois.net registration pages for WarrantyByNet's mirror sites are:


These 12 mirror sites were taken down in early March, but the registration pages persist in the "WHOIS" database for the duration of the registration. In 2003, each and every one of these 12 domain names was registered by WarrantyByNet Inc. of Brick NJ. In the time since this article was first published, the registrations have lapsed and have passed into the hands of Gaylen Brotherson of MBA Holdings, Inc., also known as Mechanical Breakdown Administrators Inc.

Note that one of Kaye's registrations, for "warrentybynet.com," includes a deliberately misspelled word -- it's a so-called "typosquatting" site that mirrors the legitimate WarrantyByNet.com home page. Another of his sites, Auto Buyers Advice .com , actually advertises the services of Warranty Direct -- one of WarrantyByNet's direct competitors.

Nothing Illegal Alleged

Let's make one thing clear. Nothing we've been told suggests any criminal behavior by anyone involved. We're not sure that anything these companies have done online would be of any interest to either law enforcement authorities, market regulators, or consumer advocates. In fact, the Better Business Bureau and others say that WarrantyByNet has a satisfactory rating, and nobody has told us there is any problem at all with claims payments.

However, we're certain that some of the owners of these registered trademarks and reputable brands will take exception to how their valuable and famous names have been used for the commercial gain of KayeTech Systems and WarrantyByNet.

We'll tackle these five points in order:

1) KayeTech's pages include outdated A.M. Best ratings

WarrantyByNet said their reinsurance underwriter is the American Re-Insurance Company, the principal operating subsidiary of the American Re Corp. That company has a legacy that goes back to at least 1917. Its German parent company, Munich Re, goes back more than 120 years. Moody's gives American Re an Aa2 rating, and Standard & Poor's gives it an AA-. A.M. Best gives it an A+ rating.

Those are high marks by anyone's standards. However, for years A.M. Best had given American Re an A++ rating, until it was downgraded one notch on Dec. 6, 2002.

You can read all about the downgrade on American Re's site, although it's not strictly relevant to this discussion. What is relevant is that Kaye's 20 advice sites, which were posted in late 2001, still contained the old rating as of Feb. 24, 2003. And they didn't do so casually in the fine print. They featured the name A.M. Best and the rating A++ as proof of WarrantyByNet's financial stability. The pages were edited in late February or early March to include the up-to-date rating. Here is an archived copy of the old page, saved on Feb. 22, 2003.

In contrast, WarrantyByNet's home page included the up-to-date and correct rating since well before Warranty Week began researching this article in mid-February 2003. However, the pages merely state "A+ (Superior) Rated by A.M. Best & Co.," without any clear indication of whom or what was being rated. We suspect the reader is being invited to jump to the conclusion that WarrantyByNet is the entity that's rated A+, although if the reader were to click onwards to the company information page, one would find additional details that make it clear that it's the reinsurance underwriter that's rated A+ by A.M. Best, not WarrantyByNet.

Not the First Time

"We've had issues like this before," noted A.M. Best's Sheila Penn. She said there is not a very large difference between an A+ and an A++ rating, and in fact both are considered superior ratings. But that's not the point. In December 2002, the rating changed. In the next few months, WarrantyByNet found the time to correct all of its pages while KayeTech Systems did not correct any of its pages until after this article was first published in an email message distributed to subscribers on Feb. 24, 2003.

"What they have up there is false advertising," Penn said. "It is deceiving the consumer. No matter what, someone somewhere has control over that page, and needs to take it down and make it right. Otherwise, we could file a lawsuit against them for misrepresenting our company."

Penn said A.M. Best has an office of intellectual management, whose job it is to make sure anyone who quotes the company does so accurately. "We don't want to misrepresent anything, and we don't ourselves want to be misrepresented either," she said. "Whenever we find anything like this out, we try to take care of it as soon as possible, because we know that people rely on our good name and our readings as well. That could make a difference between you going with one company or another. And we don't like anyone to falsely represent anything involving us, our name, or our readings."

2) Possible exaggerations or unsupported claims

Besides the A.M. Best rating, about the only other material fact that KayeTech Systems clearly gets wrong is the notion that WarrantyByNet's expertise "was gained and perfected long before the existence of the Internet." According to the Better Business Bureau, WarrantyByNet opened in March 1999 and its parent company Automobile Protection Plan Inc. opened in May 1994.

The Internet has existed in some form since at least 1969, and the protocols that drive the World Wide Web were invented in 1989. By May of 1994, there were already more than 20,000 Class C networks and three million hosts on the Internet.

There are numerous other marketing claims made on KayeTech Systems' pages that are harder to dispute. For instance, how can anybody verify that WarrantyByNet employs "knowledgeable, experienced and friendly consultants," as Kaye's advice pages claim? He also calls WarrantyByNet "one of the largest and most solidly backed extended warranty companies on the Internet" and "one of the most financially sound auto warranty companies in the marketplace." Compared to what? One could argue endlessly over the meaning of the phrase "one of," or one could just move on.

Likewise, phrases that attribute "more competitive" prices and "superior customer service" to WarrantyByNet are unlikely to be mistaken as facts. Instead, most readers will see them for what they are: as comparative assertions and marketing boasts that may or may not be true. We asked Kaye by email how he arrived at these advertising claims and whether he or some third party performed the research upon which they were based. We're still waiting for an answer.

3) These are "advisortisements," advertisements posing as advice

Tune in to some of the programming on late-night television and you might drop in on the middle of an "infomercial," which blends the advertising content of a commercial with the informational content of a news program or talk show. In some respects, this is what Kaye's pages do: they blend advertisements with information.

However, all of Kaye's pages are labeled in the top left corner as "Auto Buying Advice," and he signed his email with the tag, "President, Auto Buyers Advice." In other words, he is representing himself as an expert, and his pages as expert opinions.

The infomercials promise cleaner clothes or shinier wax. They don't typically offer advice. So we're coining a new term to describe this family of advice/advertisement pages: "advisortisements." They are advertisements posing as advice columns. And of course, their advice is to buy an extended warranty from WarrantyByNet.

Live Bait

One market expert likened these pages to lobster traps or spider webs. They are designed to ensnare the user and drive them towards a Web form, into which they must enter their personal information in return for a free rate quote. It's called online marketing. Give something to get something. Everybody does it, to some extent. That KayeTech and WarrantyByNet do it better is something for which they should be congratulated, not criticized.

However, in our opinion, if everybody else is setting out a lobster trap or two, these guys are using great big tuna nets. Nobody else to our knowledge has a fleet of a dozen mirror sites and 20 cross-linked advice columns that so cleverly use the intricacies of the Web to their own advantage. In fact, we can't find anybody with even half as many. These guys are in first place and everyone else is tied for second.

By no means are these the only pages on the Internet that offer free advice about automobiles or free quotes for extended warranties. There are other non-KayeTech Systems pages that also recommend WarrantyByNet exclusively, and there are other pages that use one ruse or another to ensnare the reader in another vendor's net. There are affiliate relationships, paid links, and referral programs all over the industry. But nobody does it as well as KayeTech and WarrantyByNet.

There are also lots of lists of extended warranty vendors. There are alphabetical lists and there are link collections that follow their own peculiar rules of alphabetization. There are some that list their favorites up top and the rest below. No doubt, money changes hands to move all those "W" companies that ordinarily would be listed towards the bottom up to the top.

And then there is the rare site that actually offers in-depth information, blended with a recommendation or two. For instance, almost every page of the online book "Good As New" once included a banner ad for WarrantyByNet. However, every chapter also is filled with anecdotes, tips, and advice that make it well worth reading. In instances like this, the advertising is merely paying the bills and is not, we hope, the reason the site was created.

Real Advice Plus Recommendations

Another auto advice site, called CarBuyingTips.com, sprinkles multiple vendor recommendations into its pages. Those recommendations are paid for, as author Jeff Ostroff readily acknowledges.

"Everybody pays us -- and we do disclose that -- but we're going to send people to places that are going to treat them the best," he said. "Because let me tell you something: when the companies rip people off, I'm the one that hears about it."

The Web site, which next month begins its seventh year online, receives about 10,000 "hits" per day, Ostroff said. He told Warranty Week that he sees himself as a "real world consumer advocate." Most consumer advocates, he said, dispense advice, highlight scams, and mediate disputes. But they usually stop short of making any endorsements. He doesn't. In the real world, someone has to pay the bills.

Ostroff said he does his own research, picks a few vendors that meet his criteria in each market segment, and then he tries to recruit them as sponsors. "We always try to pick two sources that are good," he noted. In the extended warranty section -- which is just one section of several -- he picked Warranty Direct and 1SourceAutoWarranty.com as his sponsors.

Sites such as KayeTech's 20 don't impress him much. They're marketing brochures that leave the reader no more knowledgeable after their visit than they were before. In contrast, Ostroff said he gets roughly 50 emails a day from visitors who made good use of his car buying advice. Some report they saved money or avoided scams. Others thank him for the confidence boost, which they feel helped them in some way with their dealer negotiations.

"We have married women who say they left the husband at home and they went and bought the car themselves," he said. "When they leave our site, they are extremely educated. In most cases, they'll know more than the salesman, and they'll be able to outsmart anything the salesman throws at them."

4) Kaye is "spamdexing" the search engines

Each of Kaye's advice pages is carefully crafted to increase its ranking on the major search engines. Virtually any search term seeking information on extended warranties is going to at least partially match one of his URLs. It might match several. In fact, he's even planned for misspelled search words such as warrenty, waranty, or warrantys in his choice of URLs.

In addition, each of his advice pages includes a series of keywords, listed within the HTML code in a field called a meta tag. Since meta tags are included at the top of the page in the header section, they are normally invisible to the reader. However, search engines can "see" these keywords. Indeed, they use them to help rank the relevance of a specific page to a person's search. The closer the match, the higher the ranking. In the old days, some Web page authors used to fool the search engines by endlessly repeating one word hundreds of times in order to get a better ranking. Now, the search engines have smartened up. Many now screen out pages that repeat a word or phrase more than seven times.

Kaye's pages include these keywords in a meta tag: auto warranty, extended warranty, auto extended warranty, extended warranties, car warranty, automobile extended warranties, auto warranties, automobile warranties, extended auto warranty, extended car warranty, automobile extended warranty, car warranties, gm extended warranty, extended auto warranties, extended automobile warranties, used car warranty, car extended warranty, used car warranties, extended car warranties, extended vehicle warranties, ford extended warranty, chrysler warranty, warranty gold, extended vehicle warranty, ford warranty, vehicle extended warranty, vehicle warranty, warranty direct, honda warranty, extended automobile warranty, honda extended warranty, auto extended warranties, used car extended warranty, new car warranties, chrysler extended warranty, extended warranty auto, automotive warranty.

Invisible URLs

As if that's not enough, Kaye also includes invisible keywords at the bottom of his pages. Take a look at the bottom margin of any of Kaye's advice pages, and you will see nothing unusual.

For instance, take a look at the ExtendedWarranty.org page, or our archived copy of the AutoBuyingAdvice.com page. Under the copyright notice is perhaps an inch of space -- an eye-pleasing margin with blue lines on a white background that's also repeated on the left and right sides.

Now roll your mouse over that bottom margin. Notice that there are actually invisible hyperlinks down there. In fact, there are 20 hyperlinks, and they're all colored white so they'll blend in to the background.

Warranty Week has taken those links and colored them gray on a page we have posted on our site for the purpose of showing our readers what the search engines really see when they index one of Kaye's pages. Open both and see for yourself what he's done.

Theoretically, cross-linking in this fashion boosts ranking. Besides keywords and meta tags, one of the attributes the search engines use to compute their rankings are the number of other sites that link to a given page. This boosts the "importance" of a page, on the theory that the more others point to a given page, the more important it must be. In the case of Kaye's family of 20 sites, each has at least 19 others that link to it, albeit on a wavelength that's invisible to the naked eye.

In fact, even if the search engines are smart enough to be suspicious of links written in the same color as the background, they'll pass these links by, because they're written in an off-white shade somewhere between "snow" and "ivory" on the color wheel. Meanwhile the background is pure white. The difference is subtle, but it's sufficient to fool a machine.

This is not the only instance where Kaye has inserted "invisible" links at the bottom of his Web pages. He does the same thing in half a dozen cross-linked sites aimed at Web users seeking automobile loans, including:

More could be on the way. A Sept. 2002 study by Harvard Law School student Ben Edelman entitled "Survey of Usage of the .US Top-Level Domain", found that David Kaye had registered 13 Web sites in the US domain, including audio-books.us, book-clubs.us, book-search.us, books-online.us, cheap-books.us, online-books.us, outofprintbooks.us, stock-market.us, stock-quote.us, stock-quotes.us, textbooks.us, usedbooks.us, and used-books.us. Most of these remain inactive.

5) WarrantyByNet's mirror sites may infringe upon the trademarks of automakers

Nobody on the Warranty Week staff has a law degree, so it would be unwise for us to offer a legal opinion. However, we note that the 12 WarrantyByNet mirror sites listed up top are clearly commercial. They do not offer any content that suggests they are providing news, advice, satire, parody, criticism, or commentary. Rather, they are exact replicas of the main site posted at warrantybynet.com, whose obvious function is to entice the user into requesting a price quote. We also note that WarrantyByNet also once ran a 13th mirror site at 1awarranty.com that did not use a trademark in its name. That Web site is now defunct. But in its day, it was identical to the 12 other mirror sites that were active until they were shut off in March 2003.

Brand Names in the URLs

The URLs of each of these 12 other mirror sites includes a brand name owned by either Audi, BMW, DaimlerChrysler, Ford, General Motors, Hyundai, Toyota, or Volvo. We can't fathom how the doctrines of fair use or fair comment would apply in any way, since these Web sites appear to be totally commercial -- designed solely to ensnare users who might innocently type the brand name of their car followed by the word warranty. They are not advice columns. They do not criticize a famous company, as in BoycottCoke.com or some other anti-Brand-X site. In no way do they review or compare the terms and conditions of the relevant auto manufacturer's warranties whose trademark they use.

There are a few other brand name auto warranty sites that could mount a plausible defense against a claim of trademark infringement. Indeed, General Motors itself has registered the name pontiacwarranty.net, although as of yet there's nothing substantial posted at that URL. Then there's hondawarranty.net, which was once registered by an auto dealership named Springfield Acura, which of course sells cars made by the Acura Division of the American Honda Motor Company Inc. and also operated the AcuraWarranty.com site. But what right does WarrantyByNet have to use the trademarked brand names of automobiles solely as bait?


Back to Part One   Go to Part Three

 

This Week's Warranty Headlines:

NY State Dept. of Motor Vehicles includes Viking Warranty, insurance, and credit card ads with renewal mailings in test program with Imagitas Inc.
USA Today, Feb. 21, 2003
Boston law firm files class action lawsuit, charges U.S. automakers block imports from Canada & refuse to honor warranties on those imports.
ConsumerAffairs.com, Feb. 20, 2003
Work declines at auto repair shops. Quality is a mixed blessing. Tough cars mean dealers earn less warranty money.
Detroit Free Press, Feb. 14, 2003
More users report problems with Sony PlayStation 2, complain that 90-day warranty is insufficient.
News Channel 10, Providence RI, Feb. 14, 2003
Dell's profits soar, company cuts costs by more than expected, reduced warranty expenses cited.
Austin American-Statesman, Feb. 14, 2003
Dixons Group plc chief executive launches public attack on UK Consumers' Association after the group claims that extended warranties sold by electrical retailers are a "rip-off."
Daily Telegraph, Feb. 14, 2003
California Air Resources Board tells General Motors to extend warranty on 1996-2001 truck/SUV fuel injection systems from 3 years/50,000 miles to 10 years/200,000 miles. GM to absorb $115-per-vehicle fuel injector cleaning cost.
Reuters, Feb. 12, 2003
General Motors gives complete interior contract for 2006 Cadillac DeVille and Buick LeSabre to Lear Corp.; hopes that having single supplier saves on warranty cost.
Forbes, Feb. 11, 2003
R. L. Polk & Co. says 2002 median car age hits record 8.4 years, advances in vehicle quality and engine technology help produce second-lowest scrappage rate among passenger cars.
News Release, Feb. 11, 2003
Extended warranty providers weather the holiday sales doldrums, most made it through the fourth quarter of 2002 largely unscathed.
This Week in Consumer Electronics, Feb. 10, 2003
Why's my cell phone melting? Nokia warns customers that unauthorized third party batteries can overheat, voiding warranty
CNET News.com, Feb. 7, 2003
Callaway Golf Co. reports 2002 financial results; earnings increase 26% after one-time gain from $17 million warranty reserve reduction.
Press Release, Feb. 6, 2003
Datamonitor report calls CRM in 2002 "a shrinking market," revenue recovers to US$3 billion in 2005 but by then the damage is done to current vendors.
Datamonitor, Feb. 4, 2003
California Department of Consumer Affairs finds auto repair problems are top consumer complaint in 2002.
News Release, Feb. 3, 2003
Chrysler announces sales decline in January, launches "The Best Values in America" ad campaign emphasizing 7/70 warranty.
USA Today, Feb. 3, 2003
TREAD Act early warning deadline looms
Industry Week, Feb. 1, 2003
Hyundai pumps up loan deals & rebates to counter Detroit's incentives
USA Today, Jan. 30, 2003
Zenith recalls 80K large-screen analog projection TVs made in 1995-98 due to possible coolant leakage
Consumer Product Safety Commission, Jan. 30, 2003
Former U.S. Senator Frank Moss of Utah, co-author of Magnuson-Moss Warranty Act, died Jan. 29 at age 91.
Fox News, Jan. 29, 2003
Siebel Systems to make software for IBM's WebSphere application server
CNET News.com Jan. 28, 2003
Microsoft Business Solutions to resell customer relationship management package by Crystal Decisions
News Release, Jan. 21, 2003
 
    see also:
Microsoft Business Solutions CRM home
AutoNation executives endorse the National Automobile Dealers Association's new code of ethics at Florida conference.
News Release, Jan. 20, 2003
Feds warn on high-tech devices in autos
Associated Press, Jan. 15, 2003
Six dirty secrets of car sales. Getting overcharged on the car lot? You may not even know it.
CNN/Money, Jan. 10, 2003
Tire blow-out case settled. Ford, Bridgestone reach deal in death of NAACP official.
The Detroit News, Jan. 9, 2003
Shareholders of Interstate National Dealer Services Inc. approve merger with COO Cindy H. Luby's CHL Holdings Corp.
News Release, Jan. 8, 2003
Chrysler is trying to boost resale values by offering transferable warranties, quality initiatives, $5M TV campaign. Warranty offer likely to have delayed effect - Takes 5-years for high resale value message to permeate market.
Brand Week, Dec. 16, 2002, via Automotive Digest, Jan. 7, 2003
Finbarr OíNeill: Kicking Hyundai into high gear. How he transformed the Korean carmaker into a player.
Newsweek, Jan. 6, 2003
Active Web Services announces TREAD Act reporting capabilities.
Press Release, Jan. 2, 2003
Extended warranties to help Hyundai boost sales by 10 pct in 2003
Reuters, Jan. 2, 2003
 
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