This month, CPW's Kyle Fath, Kristin Bryan, Christina Lamoureux & Elizabeth Helpling explained how data privacy and cybersecurity were Federal Trade Commission ("FTC") priorities. As they wrote, there were "three key areas of interest to consumer privacy that are now in the FTC's spotlight, as well as their relation to state privacy legislation and their anticipated impact to civil litigation." One area of interest they identified was deceptive and manipulative conduct on the Internet (including so-called "dark patterns"). Today, the FTC announced that it was going to ramp up enforcement against illegal dark patterns that trick consumers into subscriptions. Read on to learn more and what it means going forward.
First, some background. The term "dark patterns" collectively applies manipulative techniques that can impair consumer autonomy and create traps for online shoppers (for instance, think of multi-click unsubscription options). As CPW previously explained, "[e]arlier this year, the FTC hosted a workshop called "Bringing Dark Patterns to Light," and sought comments from experts and the public to evaluate how dark patterns impact customers." The genesis for this workshop was the FTC's concern with harms caused by dark patterns, and how dark patterns may take advantage of certain groups of vulnerable consumers.
Notably, the FTC is not alone in its attention to this issue as California's Attorney General previously announced regulations that banned dark patterns and required disclosure to consumers of the right to opt-out of the sale of personal information collected through online cookies. Dark patterns has also been targeted in civil litigation. This year, the weight-loss app Noom faced a class action alleging deceptive acts through Noom's cancellation policy, automatic renewal schemes, and marketing to consumers.
Building off these prior developments, today, the FTC announced a new enforcement policy statement "warning companies against deploying illegal dark patterns that trick or trap consumers into subscription services." As the FTC cautioned, "[t]he agency is ramping up its enforcement in response to a rising number of complaints about the financial harms caused by deceptive sign up tactics, including unauthorized charges or ongoing billing that is impossible cancel."
As summarized in the FTC's press release announcing this development, businesses going forward must follow three key requirements in this area or run the risk of an enforcement action (including potential civil penalties):
- (1) Disclose clearly and conspicuouslyall material terms of the product or service: This includes disclosing how much a product and/or service costs, "deadlines by which the consumer must act to stop further charges, the amount and frequency of such charges, how to cancel, and information about the product or service itself that is needed to stop consumers from being deceived about the characteristics of the product or service."
- (2) Obtain the consumer's express informed consent before charging them for a product or services: This means "obtaining the consumer's acceptance of the negative option feature separately from other portions of the entire transaction, not including information that interferes with, detracts from, contradicts, or otherwise undermines the consumer's ability to provide their express informed consent."
- (3) Provide easy and simple cancellation to the consumer: Marketers are also to "provide cancellation mechanisms that are at least as easy to use as the method the consumer used to buy the product or service in the first place."
This development is likely one of only many anticipated to be rolled out in light of the FTC's continued focus on data privacy and cybersecurity. For more on this, stay tuned-CPW will be there to keep you in the loop.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.