The Honey-Trap: Litigation, Lies and Scandal

Over the past week, a lot has come to light about Honey (Paypal Honey). Many of us have watched as our favourite creators suddenly realized they may have been cheated out of substantial affiliate link income, potentially worth thousands, if not millions, of dollars. This revolves around claims of last-minute swapping of affiliate codes before checkout. I say claims because, thanks to Devin at LegalEagle, this has turned into a class action lawsuit involving several YouTubers, TikTokers, and streamers.

Some people are surprised that PayPal, which owns Honey, might have acquired it despite knowing that such issues could later be flagged as problematic. But as someone who has used PayPal in the past and no longer does for various reasons, I’m not shocked at all. PayPal has faced lawsuits over issues like data breaches, antitrust concerns, and consumer protection violations. Many of these cases have dragged on for years, seemingly because PayPal hopes plaintiffs will run out of money to continue pursuing legal action. It’s not because they believe the cases are without merit; businesses typically act quickly to defend themselves against false accusations. Deliberately stalling legal proceedings suggests they’re banking on financial attrition—hoping that plaintiffs will give up when they can no longer afford the legal fight.

I don’t have to use the word “alleged” when it comes to this strategy because it’s a well-documented tactic in large corporate legal battles. Within the industry, it’s known as Legal Attrition Warfare (LAW, ironically) and sometimes as "Papering to death", and PayPal has been accused of using it—a practice that, while technically legal, is widely regarded as unethical. Therefore, the idea that they bought a company accused of running one of the biggest consumer and influencer scams isn’t surprising to me. As one of the largest financial firms in the world, PayPal has access to extensive financial resources and top-tier legal teams who can stretch cases out for as long as possible, even in serious legal disputes.

To say that the class action lawsuit led by Devin at LegalEagle is an uphill battle is an understatement. Honey, and by extension PayPal, is likely to prolong the case for years, betting that the influencers involved will eventually give up. However, there’s another factor in play: influence. The creators involved in this case wield significant social power, which is exactly why Honey sought them out in the first place. Now, that influence is being used to spread the word about Honey’s alleged practices, and it’s already having an impact. Reportedly, Honey had around 20 million users before MegaLag’s exposé, but they’re now down to 17 million, losing 3 million users on the Chrome Web Store alone.

So, what might PayPal do in response? The obvious move would be to shut down Honey. It’s unlikely they can implement sweeping changes that would address all the issues raised in the lawsuit. Even if they did, the damage to Honey’s reputation may be beyond repair. PayPal might decide that divesting from Honey or shutting it down entirely is the best way forward, as any attempt to salvage its image could be more costly in the long run. That said, if Honey has been a significant revenue source, PayPal might hesitate before pulling the plug, potentially dragging out the inevitable.

The fallout from this situation remains uncertain, but it’s safe to say that the outcome is likely to be messy and unpleasant for everyone involved.