With Halloween just days away, it is perhaps fitting that the FTC has issued a new enforcement policy statement warning companies not to employ dark patterns to trick customers into a subscription plan. As we covered previously, the FTC has identified dark patterns—or website design features used to deceive consumers—as a priority for both rulemaking and enforcement actions. The timing of the announcement is a bit curious as the FTC is in the middle of a rule making on negative option marketing. More below from Commissioner Wilson on that.
The enforcement policy statement in many ways reflects the requirements of the Restore Online Shoppers Confidence Act (ROSCA) and established FTC precedent regarding negative option marketing. The FTC has been active against companies who hide their subscription programs behind links, have made customers undergo several attempts to cancel their subscription, or companies who failed to disclose that the benefits of their subscription did not exist anymore.
In the policy statement, the FTC sets out three major requirements, similar to those found in ROSCA, for companies to abide by when offering anything on a subscription or auto-renew basis:
- Clear and Conspicuous Disclosure: The material terms of their subscription program (i.e. the amount that will be charged, the frequency of these charges, and the cancellation policy) must be clearly and conspicuously disclosed to customers before they purchase it. The policy specifies how companies should disclose these terms.
- Express Informed Consent: To enroll a customer in a subscription program, a company must obtain that customer’s express informed consent. To obtain this consent, the company must receive it separately from any other part of the transaction, meaning that the customer must specifically agree to the terms of the subscription program. This consent cannot include or contain any other information that would distract the customer from understanding the terms and the consent must be clear and unambiguous.
- Easy Cancellation: Companies should create a clear and easy system whereby a customer can cancel their subscription. The customer should not have to call multiple times or hunt for a way to cancel—it should be clearly labeled and easy to accomplish, so that it is at least as easy to cancel as it was to sign up for the subscription.
The FTC voted to issue this enforcement policy 3-1, with Commissioner Christine S. Wilson dissenting stating that this enforcement policy merely gets in the way of an ongoing rulemaking process on negative option marketing. In concurring, Commissioner Phillips suggested that the policy statement might make the rule unnecessary.
How the FTC intends to use the policy statement in enforcement remains unclear. Perhaps the FTC will point to the policy statement as proof “a reasonable man would have known … [conduct] was dishonest or fraudulent” for purposes of a Section 19 follow-on proceeding after an administrative trial. The FTC can already pursue, without an administrative proceeding, ROSCA violations under Section 19 and negative option violations under the TSR in the same manner.
What is clear is that dark patterns remain a high priority for the agency. Stay tuned for updates on exactly what website design features and digital marketing methods the agency intends to target.