Takeaways on Dark Patterns from the ABA Antitrust Spring Meeting
At the 72nd ABA Antitrust Spring Meeting panel “The Price is Right (Or Is It?),” panelists discussed concerns related to “dark patterns,” specifically focusing on pricing and disclosure practices such as “junk fees,” automatic renewals, and negative options. Panelists agreed that this issue will continue to be an area of interest and concern of the FTC as well as authorities outside the U.S. such as Canada and Europe.
FTC Division of Financial Practices Associate Director Malini Mithal laid down the basics: “dark patterns” refer to “design tricks” that manipulate consumers into taking actions they otherwise would not take—including paying “junk fees,” paying for recurring charges they were not aware of, or facing difficulties when trying to cancel the product or service. Ms. Mithal also discussed recent FTC enforcement actions that highlight various forms of “dark patterns,” which include:
- The FTC’s action against Amazon for its negative option plan, Amazon Prime, alleging that the company knowingly made it difficult for consumers to cancel their Prime subscription, trapping consumers into paying recurring monthly subscription fees;
- The FTC’s announced settlement against DNA testing company CRI, which allegedly engaged in multiple practices of “dark patterns” including posting fake reviews from supposedly satisfied customers on its website, falsely claiming it had unlimited testing kits, and posting high ratings on what appear to be neutral websites that were actually owned by the company itself. Additionally, the company also allegedly showed pop-up pages with false claims that led to consumers being charged without their consent;
- And the FTC’s action against personal finance app Brigit, alleging that it falsely promised its consumers that they would instantly receive $250 cash advances every month they enroll in its $10 monthly subscription plan. The FTC claims that, in reality, cash advances were less than what was promised by the company, there were hidden fees that consumers had to pay to receive the cash advances, and the company made it hard for the consumer to navigate cancellations of the plan.
The prevalence of “dark patterns” and related pricing issues across a broad range of markets can target and harm various populations. While regulations in the past decade have focused on marketing measures such as automatic renewals, nowadays companies’ ability to gather massive amounts of consumer information has the potential to result in greater harm to consumers. Marketers can not only influence a certain population but can now also implement designs that capture a specific individual’s online behaviors (i.e., what drives a person to click on a web page in the moment). Alysha Manji-Knight from Davies Ward Phillips & Vineberg LLP, Toronto, added that another factor that can facilitate “dark patterns” becoming larger in scale is the usage of AI: When companies develop their marketing tactics, AI can easily learn and imitate “dark patterns” that induce consumers into engaging with the product or service.
However, it can be difficult to identify “dark patterns.” Donnelly L. McDowell of Kelley Drye & Warren LLP, Washington, DC, indicated that there are borderline actions that often make it hard to distinguish between manipulation of consumer choice (i.e. standard deception such as tricking consumers into paying for something they did not intend to pay for) and marketing that is not necessarily deceptive. Ms. Mithal provided a general tip for companies when marketing: In order to not cross the line where the marketing measure becomes a “dark pattern,” the company should market the product based on its actual features. Marketing measures that hide the product’s true features, such as omitting certain fees and/or decreasing font size on important information, can become problematic.
One observation of “dark patterns” that was brought up during the discussion relates to “junk fees,” a scenario in which consumers pay a fee under false pretenses or pay a fee they were not aware of. Examples include when a company states one price for their product but charges their consumers a different price, or when a company automatically adds on extra charges without consumers’ acknowledgement. In quantifying harm to consumers, Ms. Mithal shared a theory accepted by some Courts: Even if the consumer can get the “junk fees” removed, they also experienced lost time spent transacting with the company under false pretenses. Such harm can be measured by the value of that consumer’s lost time using their wage rate data.
In the discussion on “junk fees,” the panelists discussed the FTC’s proposed rule, which addresses “junk fees” by requiring full disclosure of the nature, purpose, and amount of the total price that a consumer may pay. Under the proposed rule, businesses cannot misrepresent the nature or purpose of fees and are required to disclose any additional fees that may incur such as shipping charges. Mr. McDowell pointed to issues that can complicate how companies comply with the disclosure of fees under the proposed rule: For example, dynamic pricing associated with delivery and service fees may depend on where the consumer is located, where the product is located, and what type of service the consumer selects. There may also be an issue of assessing fees that do not reasonably correlate to their rationale, such as the example of recent rulemaking from the CFPB to cap credit card late fees at $8.
Panelists agreed that for companies assessing how they should comply with full disclosure of total price and other regulations on “dark patterns,” it is also crucial to see through the lens of the consumer. Stijn de Jong from Stibbe, Amsterdam, commented that it might not always be the case that providing consumers with more information is more beneficial for them, and in fact too much information can sometimes work adversely. Panelists discussed that it is helpful for companies to perform testing to see if consumers are going to be tricked by certain techniques. However, it was noted that companies should make sure they are testing for consumer understanding rather than changing their designs at the margin only to suppress customer complaints. Moderator Ceren Canal Aruoba from Cornerstone Research, Washington, DC, also commented on this matter, sharing that there are economic tools and marketing tools to help assess what consumers think, including surveys and natural experiments.
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