Last month, the National Advertising Division of BBB National Programs reviewed Pier 1's subscription rewards program and recommended that the company provide clearer disclosures of the automatic renewal program.
The case, brought as part of NAD's monitoring activities, analyzed the Pier 1 Rewards program, a subscription-based customer loyalty program through which customers are charged a recurring monthly or annual fee. The membership provides a 10% discount sitewide and free shipping and returns on eligible items.
According to NAD, when a consumer added an item to their cart on the Pier 1 website, the Pier 1 Rewards subscription was automatically added to their cart as a pre-checked button that appears immediately next to the Pier 1 Rewards logo. The price of the product with the 10% discount appears below the item, and details about the Pier 1 Rewards membership program appear below the pre-checked box. A consumer must affirmatively uncheck the Pier 1 Rewards membership that is added to the cart to remove it and not incur the additional membership fee.
NAD reviewed the website and noted that it presented two issues: whether advertising a reduced price for a product is misleading if it reflects a 10% discount that is available only with a subscription to Pier 1 Rewards; and whether the material terms and conditions of the Pier 1 Rewards subscription were clearly and conspicuously disclosed before the consumer made a purchasing decision.
NAD concluded that one of the material terms of the rewards program—namely, the autorenewal nature of the subscription and how to cancel it—was not displayed when the consumer saw the discounted price. Further, NAD took issue with the website's use of a "Learn more" hyperlink that consumers were required to click to find out the material terms of the Pier 1 Rewards program. Thus, NAD recommended that the company clearly and conspicuously disclose the material terms of Pier 1 Rewards at the time the item is added to a cart.
In doing so, NAD pointed to the Federal Trade Commission's 2022 Staff Report, "Bringing Dark Patterns to Light," which discussed "user interface design practices that manipulate users into making choices they would not otherwise have made and that may cause harm." NAD specifically cited the practice of "automatically adding items to the shopping cart without a shopper's permission or tricking a shopper into buying unwanted items by using a pre-checked box" and provided guidance concerning negative option disclosures.
The case is not the first time that NAD has taken on "dark patterns" or autorenewal programs, and it is unlikely to be the last. Indeed, NAD made clear in the decision that it has reviewed negative option advertising claims, but its role is not to determine whether the offers met the FTC regulations and the Restore Online Shoppers' Confidence Act (ROSCA). Rather, NAD assessed "whether the advertising is misleading, and the advertiser clearly and conspicuously discloses the material terms and conditions of the advertised program or offer within the four corners of the advertising in which that claim appears to ensure a company has not attracted business through a misleading initial approach."
The case demonstrates that yet another regulator (even if it is a self-regulatory body) is scrutinizing negative option and autorenewal programs, in addition to the FTC, state attorneys general, the California Auto Renewal Task Force (CART), and class action plaintiffs. Companies should therefore take care to comply with applicable regulations.
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