For $9.99 per month, Pier 1 offers Pier 1 Rewards, a loyalty program that includes benefits such as a 10% discount on all purchases and free shipping and returns on eligible items. Until recently, when a consumer added an item to a cart, the company would automatically also add the Pier 1 Rewards membership to the cart (with a pre-checked box indicating acceptance) and apply the 10% discount. A consumer had to uncheck the box to remove the membership from the cart.
NAD discovered this as part of their routine monitoring – or routine shopping (it’s hard to tell) – and had two related concerns about what Pier 1 was doing. First, whether advertising a discounted price for a product is misleading if it reflects a discount that is only available with a subscription. And second, whether Pier 1 clearly and conspicuously disclosed the material terms of the subscription before a consumer made a purchase decision.
NAD determined that it could be misleading to advertise a discounted price if it reflects a discount that’s only available with a subscription, unless the terms of the subscription are clearly disclosed. In this case, NAD was concerned that the subscription was automatically added to a cart with a pre-checked box, but that consumers wouldn’t see the material terms – including that the subscription automatically renews – unless they clicked on a link to “Learn More.” (NAD also questioned whether a pre-checked box was sufficient to show acceptance, though it stopped short of saying it wasn’t.)
In its decision, NAD leaned on the FTC’s “Bringing Dark Patterns to Light” report and the agency’s .com Disclosure guidelines. To those who have been following the FTC and state AG enforcement on automatic-renewals, the decision shouldn’t come as a surprise. But it does serve as a good reminder of how important it is to clearly disclose subscription terms, especially as more companies begin to offer discounts that are contingent upon consumers signing up for other services.