Digital River has not paid numerous merchants since midsummer for software and digital products they sold through its MyCommerce platform.
"After over 20 years of partnership with Digital River, Traction Software Ltd has been left feeling as though we’ve been 'rug pulled,'" Lee Midgley, managing director of Traction Software, told The Register. "For the past three months, we’ve experienced a complete halt in software sales revenue payments with no support, no direct contact, and only additional terms and conditions designed to delay resolution and extract more money from us.
"Astonishingly, Digital River continued to take sales from our loyal customers until we removed them from the order system. It now appears they have no intention of making payments and may be entering a liquidation process under a new CEO who has been involved in similar situations before."
The new CEO, Barry Kasoff, was first noted on the e-commerce biz website in August. Kasoff is also listed as the president of Realization Services, "a full-service strategic consulting firm specializing in turnaround management and value enhancement…"
The privately-owned, Minnesota-based business appears to have laid off a significant number of employees, presumably the result of what its UK subsidiary describes as cost reduction initiatives implemented in late 2022.
Digital River, Inc, owned by parent New York-based Danube Private Holdings II, LLC, has several subsidiaries including Digital River GmbH, Digital River Ireland Ltd, and Digital River UK Limited. The company did not respond to a request for comment.
A December 29, 2023 financial filing [PDF] for the UK subsidiary contains an audit report from UK chartered accountancy Durrants that calls out potential financial problems that threaten the e-commerce provider's ongoing viability as a business. "The Company is dependent on the ongoing liquidity of the parent company, Digital River, Inc, which is experiencing negative financial trends, potential covenant breaches, and liquidity issues. It also holds significant external debt, which has been refinanced and extended on a number of occasions."
Digital River's financial situation has evidently affected its willingness or ability to pay customers. Accounts of withheld payments abound in online forums, on social media sites, and review sites.
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On September 16, 2024, Digital River sent an email to customers informing them of "upcoming changes to our Master Services Agreement, effective October 16, 2024, for MyCommerce."
The new agreement for Digital River GmbH adds a MyCommerce Platform Fee, reduces the chargeback fee from $25 to $20 per chargeback, adds a minimum payment threshold of $2,500 or $10,000 for wire transfers outside the Single Euro Payments Area, and creates a Tier 2 Client Support offering for $185 per hour.
In a post to LinkedIn three weeks ago, Lorant Barla, CEO of Romania-based Softland, said, "Digital River is automatically 'pre-signing' contracts in your MyCommerce account without your approval. The new MSAs [Master Services Agreements] stipulate additional platform fees and payments delayed for up to 60 days (we are still waiting for the payment from July)."
Barla posted an image of his firm's MyCommerce control panel, noting that Softland's contract library contains an MSA dated October 16, 2024
"The first date is obviously in the future, so no way it was signed by us," he said. "No one in our company remembers signing the other two agreements. It is fishy that the hour is exactly 12:00:00 AM on all (like who in their right mind enters into agreements in the middle of the night)."
A response from Digital River's LinkedIn account says the digital commerce provider has the right to update its agreements.
"We understand your unease regarding the automatic 'pre-signing' of new contracts in your MyCommerce account and the stipulations of additional platform fees and delayed payments," the post says. "We assure you that our actions are guided by the terms outlined in our Master Service Agreement (MSA). Per our MSA, we reserve the right to update the agreement as needed to reflect changes in our services, regulations, or financial considerations."
One of the vendors who has been asking to be paid showed The Register a note received from Digital River's law firm, New York-based Mintz & Gold, in response to payment inquiries.
The law firm says that Digital River presently doesn't consider merchant debt claims to be valid obligations. The note reads, "I am writing on behalf of my law firm’s client, Digital River, regarding the inquiry you submitted to Digital River’s Solution Center. We are in the process of validating invoices and claim amounts from MyCommerce publishers. Digital River intends to reach out to MyCommerce publishers … in the near future concerning processing invoices per contract terms. In the interim, please know that Digital River disputes the claimed debt."
Digital River's attorneys from Mintz & Gold did not respond to a request for comment.
Affected vendors are presently trying to organize a class action lawsuit against Digital River. ®