In a case that will likely resonate with many readers, the FTC's recent settlement with Vonage describes in excruciating detail the obstacles and costs that Vonage allegedly imposed on consumers when they tried to cancel their phone service. In many ways, it's a typical FTC case involving deception, unauthorized charges, and misuse of a "negative option" that makes it simple to sign up and almost impossible to cancel. However, the FTC's characterization of the practices as "dark patterns," coupled with some other features, make this case stand out. Indeed, any company with a "customer retention strategy" (which is apparently what this was) would be wise to pay attention.
The FTC's Complaint
According to the FTC's complaint, Vonage provides internet based phone service (known as Voice Over Internet Protocol or VOIP) to consumers and small businesses. Monthly charges range from $5-50 for individual customers and can be as high as thousands of dollars for small businesses. In many cases, Vonage signs up consumers using a negative option plan that requires them to cancel by certain date before being charged.
The complaint alleges that, between 2017 and 2022, Vonage provided several ways to sign up for its plans (including online and via toll free number) but made cancellation much more difficult through numerous hurdles. It also alleges that, in some cases, monthly fees continued after cancellation; consumers were charged (or threatened with) undisclosed early termination fees (ETFs); and Vonage provided only partial refunds or no refunds at all. The complaint says that this was all part of a "customer retention strategy" that Vonage pursued despite hundreds of consumer complaints, knowledge among employees, and an earlier settlement with 32 states over similar allegations.
According to the complaint, these practices violated the Restore Online Shoppers' Confidence Act (ROSCA) (failure to disclose material terms, obtain informed consent before imposing charges, and provide a simple mechanism to stop recurring charges) and Section 5 (charging consumers without their express informed consent).
The Alleged Dark Patterns
The complaint devotes over ten pages to describing the many obstacles (aka dark patterns) Vonage imposed on customers seeking to cancel, clearly intending to send a strong message to other companies that might use similar strategies. Although it's not clear whether each of these practices alone would be a dark pattern (or law violation), the FTC clearly views them as contributing to the offenses here. Among other things, the FTC alleges that Vonage:
- Allowed sign-up for the service through multiple means but limited cancellation to one method: calling and reaching a live "retention agent" at a special phone number during limited hours.
- Failed to disclose at sign-up that cancellation options would be limited.
- Made it hard to find the special phone number on the website.
- Kept people on hold during extended periods, leading them to give up on requesting cancellation.
- Transferred consumers who called the general customer service number to the special number, causing double wait times and/or dropped calls.
- Subjected those that actually reached a live agent to aggressive sales pitches convincing them to change their minds about cancellation.
- Added even more steps for small accountholders, who had to start with chat support and wait to be transferred or called back (which sometimes didn't occur).
- Told consumers that tried to cancel that they would owe ETFs (which weren't clearly disclosed at the outset, and often amounted to the full balance of a long-term contract).
- Used various tactics to cause consumers to miss the cancellation deadline, thus triggering the ETFs.
The order requires Vonage to pay $100 million in refunds to affected consumers. In addition, like many orders involving negative options, it contains detailed provisions governing the use of such offers – including requirements to disclose the terms of the offer, obtain express informed consent for charges, and provide a simple cancellation process.
However, there are some confusing differences from prior orders – notably, a provision concerning (yes) dark patterns that is extremely broad and vague, especially for an order that could bring contempt charges for violations. Specifically, the order says that the "simple cancellation mechanism" can't require a consumer to take an action that is "objectively unnecessary to cancel, including using a Dark Pattern," which the order defines as a "user interface that has the effect of impeding consumers' expression or preference, manipulating consumers into taking certain action or otherwise subverting consumers' choice."
Huh? For companies already struggling to discern the many practices that might be considered dark patterns, this order won't help. However, there's plenty of guidance elsewhere, including (in addition to the complaint in this case), the FTC's recent report on the topic and our earlier blogposts on dark patterns, found here, here, and here).
Some Murky Facts
Finally, one issue in the complaint that's confusing and potentially significant concerns the ETFs and contract balances. On a quick read, the complaint makes it seem like every customer was "tricked" by a short-term negative option, tried to cancel promptly, was thwarted by Vonage's "dark patterns," and then asked to pony up an ETF or the remaining balance on a long-term contract they never agreed to. However, there are suggestions in the complaint that at least some customers weren't trapped by a negative option but, instead, entered into special deals only available for long-term contracts. (See, for example, the ad reprinted on p. 39 – "$9.99 for 6-Months...with 1-year agreement.") These two scenarios (negative option vs. long-term contract) are very different, but the complaint fudges them. Dark patterns and fine print aside, is the FTC suggesting that consumers should be able to cancel contracts early with no charges? More clarity here would have been helpful.
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Stay tuned. We continue to track developments at the FTC and are watching in particular for additional cases involving dark patterns.
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