On October 28, the FTC issued a new enforcement policy statement warning companies against deploying “illegal dark patterns” that trick or trap consumers into subscription services, and often making websites difficult to navigate to find cancellation or refund options. The statement is intended to assist marketers by providing specific guidance on the FTC’s interpretation of existing law as it applies to “negative option marketing” through deceptive sign up tactics, including unauthorized charges or ongoing billing that is impossible to cancel. The policy statement notes that “[n]egative option offers come in a variety of forms, but all share a central feature: each contains a term or condition under which the seller may interpret a consumer’s silence or failure to take affirmative action to reject a good or service or to cancel the agreement as acceptance or continuing acceptance of the offer.” Examples include automatic renewals, free trials that convert to pay features, and continuous periodic shipments that continue until the customer cancels the shipment.
The FTC highlights three key requirements under the enforcement policy statement:
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Disclose clearly and conspicuously all material terms of the product or service, including how much it 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.
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Obtain the consumer’s express informed consent before charging them for a product or service. This includes obtaining the consumer’s acceptance of the negative option feature separately from other portions of the entire transaction, and not including information that interferes with, detracts from, contradicts, or otherwise undermines the consumer’s ability to provide their express informed consent.
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Provide easy and simple cancellation to the consumer. Marketers should 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.
Putting It Into Practice: The FTC notes that businesses must follow the above requirements or “be subject to law enforcement action, including potential civil penalties.” Therefore, companies offering a negative option program should review their marketing practices, including any related consumer complaints. It appears that the FTC will continue to rely on the Restore Online Shoppers’ Confidence Act of 2010 (ROSCA) to investigate negative option marketing and seek remedies for violations of ROSCA including consumer redress, such as damages, and other relief under Section 19 of the FTC Act. The FTC appears to be at the ready to use these alternative remedies in light of the agency’s limited ability to obtain redress for harmed consumers under Section 13(b) of the FTC Act following the Supreme Court’s recent ruling in AMG Capital Management, LLC v. FTC (we previously discussed this recent trend in earlier Consumer Finance & FinTech Blog posts here and here).
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