By Naveen Athrappully
The Federal Trade Commission (FTC) released a report Thursday about how companies deploy “dark patterns” in advertising for enticing potential customers, manipulating them into making purchases and giving up their privacy in the process.
“Our report shows how more and more companies are using digital dark patterns to trick people into buying products and giving away their personal information,” said Samuel Levine, director of the FTC’s Bureau of Consumer Protection. “This report—and our cases—send a clear message that these traps will not be tolerated.”
Dark patterns include many oft-used marketing techniques such as ads posing as independent content, burying key terms in corporate jargon, tricking customers or website visitors into giving up personal data, making use of deceptive colors, pre-checked consent boxes, language and emotion to coerce customers into making purchases, deceptively signing up for content, tricking customers into recurring charges, and making it extremely difficult to unsubscribe.
The greater use of e-commerce in recent years has made it easier for companies to target consumers with a variety of tactics.
The FTC report, titled “Bringing Dark Patterns to Light” (pdf), examined how these tactics can obscure, subvert, or impair consumer choice, and may be violating consumer protection laws. According to the report, the FTC has sued companies making use of such tactics to deceive customers.
FTC Versus LendingClub
The FTC sued online lender LendingClub Corp. in 2018 after the company falsely marketed “no hidden fees,” when in reality, the company deducted hundreds or even thousands of dollars in hidden up-front fees from the loans.
The other allegations against LendingClub were that consumers were misinformed about being eligible for loans when they were not, and taking money from consumers’ bank accounts without authorization.
After judgment was passed, LendingClub agreed to pay out more than $9.7 million to 61,990 consumers who were charged hidden fees.
The FTC has outlined three main principles for businesses when advertising:
- Disclose clearly and accurately the material terms of the sale contract such as costs, deadlines to cancel, frequency of charges, and disclosure of essential information.
- Obtain the customer’s informed consent before the payment is made.
- Provide an easy and simple cancellation process.
Failure to comply with the requirements may result in the FTC taking action.
Refunding ABCmouse Subscriptions
In 2021, the FTC sent refund payments totaling more than $9.7 million to nearly 207,000 consumers of ABCmouse who were automatically billed for renewals, as well as those who were prevented from canceling memberships.
ABCmouse advertised “Special Offer” 6- or 12-month memberships, but failed to inform customers that their subscriptions would be automatically renewed. The marketing practice ran from 2015 to at least 2018 and led to thousands of customers having their subscriptions renewed and charged for memberships without proper consent.
Based on the settlement (pdf), ABCmouse—run by online education company Age of Learning Inc.—was required to change its negative option marketing and billing practices to settle the FTC charges, including misrepresentations about cancellations and failure to disclose important information to consumers.