"Now or never." "Don't delay." "No-fee sign-up." "No registration required." "Free 30-day trial." Such advertising messages can be deceptive when they—as it seems they all too often do—send consumers down a rabbit hole where personal information is collected despite promises to the contrary, or sign consumers up for purchase plans they don't realize they have agreed to. Depending upon the nature of the violation, such advertising can lead to multimillion-dollar settlements and potential civil penalties. The Federal Trade Commission (FTC) has increasingly used the term "dark patterns" for this type of misleading messaging and has signaled again and again that it is particularly concerned with these seemingly ubiquitous marketing tactics.
"Dark patterns" refer to a variety of manipulative tactics that trick or trap unwary users by using language, layout, color, and font size designed to nudge the consumer in the direction of a purchase. For example, some websites require consumers to navigate confusing questions and a dizzying range of screens if they want to avoid being charged for products or services. Others slide unwanted products or services into the user's online shopping cart. Others sign consumers up for recurring services, goods, and charges and make cancellation—even assuming the consumer realizes what they have signed on to—exceedingly difficult. Tricking consumers into a purchase or signing up for a service, or trapping them into a subscription or recurring charges, are false and deceptive business practices.
In particular, negative option programs (also known less pejoratively as continuity programs), where the goods or services—and the concomitant charges—keep coming until the consumer cancels, have been the subject of a great deal of FTC enforcement ire. Continuity programs, whether garden-variety subscription programs or so-called free-trial-to-pay conversions, have received much FTC scrutiny over the years. The FTC has singled out many companies for signing up customers for recurring charges, often without consumers really understanding what it is they are signing up for.
Dark patterns exist in other types of advertising programs as well. The FTC has sued companies for deceptive marketing practices that create a false sense of urgency. Companies have displayed fictitious messages—for example, stating that very few tickets were available for an event or flight when, in reality, there were many tickets available. Such advertising manipulates consumers into believing that if they don't act immediately they will miss out on the opportunity. Other pressuring mechanisms involve using a countdown timer that serves no purpose other than pressuring consumers into making a purchase immediately.
False sales messages are also deceptive and can put undue pressure on consumers. Creating bogus discounted prices (using a rarely or never-charged base or "reference" price as the original) constitutes a dark pattern: the FTC's Guides Against Deceptive Pricing explicitly addresses the use of fictitious prices. The Guides explain that pricing that is too good to be true or plainly inaccurate is a deceptive practice used to attract users to purchase.
Yet, despite other areas of concern, over and again the FTC has come back to dark patterns in negative option marketing. Negative option marketing is already subject to regulation under both the FTC's Negative Option Rule (which currently covers a subset of such programs) and the Restore Online Shoppers' Confidence Act (ROSCA). Nonetheless, in 2021, the FTC issued an Enforcement Policy Statement Regarding Negative Option Marketing, warning businesses against using illegal "dark patterns" that deceive consumers.1 The FTC's Enforcement Policy Statement puts businesses on additional notice that deceptive sign-up policies that do not provide clear information and make cancellation difficult remain of serious concern to the FTC—in concert with existing regulation and guidance.
Negative Option Marketing: Three Key Requirements of the FTC's Enforcement Policy Statement
Like other FTC guidance, an enforcement policy statement is not itself law, but it does communicate what the FTC has considered to be deceptive practices which violate Section 5 of the FTC Act. Such statements summarize the principles underlying the Commission's enforcement actions, advisory opinions, and other guidance that the agency has issued over time. The FTC describes its Negative Option Enforcement Policy Statement as "intended to assist the business community and practitioners by providing specific guidance on the Commission's interpretation of existing law as it applies to negative option practices."
Businesses would be wise to pay close attention to three main principles the FTC has outlined when advertising a negative option program:
- Disclose clearly and conspicuously all material terms and conditions of the product or service. Material terms include costs, deadlines to cancel additional charges, the frequency of all charges, and information about the product or service that is essential to avoid deceiving the consumer about the basic characteristics of the purchased service or good. The terms should be made prominent alongside the deal.
- Obtain the consumer's informed consent. The express informed consent of the user must be obtained before the user can be charged anything.
- Provide an easy and simple cancellation process. The cancellation method should be at least as simple as the method of purchasing the service or product.
These suggestions generally mimic the requirements of ROSCA. The Enforcement Policy Statement, however, seems to go even further than that existing law. The Statement suggests that companies should take additional action to strengthen consumer protection, including providing the ability to cancel in the same manner in which they signed up, e.g., via a website or mobile application. The Statement further suggests that marketers obtain affirmative consent for recurring charges separately from other portions of the transaction. A separate acceptance of recurring subscriptions can be obtained by directing consumers to a different check box or pop-up page.
Implication for Businesses
Businesses can find themselves the subject of FTC action for failing to comply with the key requirements mentioned above, or for engaging in other deceptive practices, including deceptive pricing or creating a false urgency to buy. Companies should review their marketing practices and consumer complaints to ensure compliance with the FTC's marketing requirements.
FOOTNOTE
1 The FTC's decision to issue the Policy Statement was somewhat unusual given the existence of pending rulemaking regarding negative option programs. The Commission published a Federal Register Notice in 2019 seeking comment on whether the Commission should broaden its Prenotification Negative Option Rule to expand the types of negative option marketing the existing rule covers. Rulemaking is, however, a very slow process.