The case represents the FTC’s second “dark patterns” action in the past week (see also the FTC’s complaint against Amazon), signaling that this issue remains at the forefront of the FTC’s enforcement agenda. (See here and here for more context and analysis on “dark patterns.”)

The Complaint

According to the FTC, PCH engaged in deceptive “dark patterns” such as:

• Multiple entry forms and “call-to-action” buttons that told consumers they were registering for sweepstakes but in reality directed consumers to e-commerce sites, where they were encouraged to purchase products. Consumers had to click on an additional “call-to-action” button to complete sweepstakes entry, which didn’t appear until consumers finished scrolling through the e-commerce site.
• Subsequent emails telling consumers they must complete another “final step” in order to be eligible to win prizes, when in fact no such “final step” was necessary. Clicking on the link to complete the “final step” led consumers to more e-commerce sites and other “call-to action” buttons to enter the sweepstakes.
• Use of language and website design elements to conflate the sweepstakes entry process with the product ordering process. For example, naming the sweepstakes entry form the “Official Order-Entry Form” or classifying consumers as “Preferred Customers” or “Presidential Preferred Customers” if they placed product orders. According to the FTC, this led consumers to believe they could increase their chances of winning prizes if they bought products from PCH, which is prohibited by state laws.
• Website notifications and design elements that hindered consumers from completing sweepstakes enrollment if they hadn’t purchased any products.
• Order summary pages and emails that didn’t include total costs, including shipping and handling charges or applicable taxes, or that included the costs in a way designed to obscure them from view. The FTC noted that shipping and handling costs were typically around 41% of product costs and could be as high or higher than 100% of product costs, and that PCH executives were well aware that many customers experienced shipping and handling “sticker shock.”
• Disclosures – such as the disclosure that “no purchase is necessary” that companies are required to make when promoting sweepstakes – made in light-colored typeface and included “below the frame” of the webpage, meaning consumers had to scroll down all the way to the bottom (and past the prominent “Continue” button) to see them.

In addition, the FTC said that PCH’s use of email subject headings featuring references to a “W” followed by a hyphen and a number led consumers to believe they were in reference to IRS W-2 forms, thus creating a false sense of urgency and importance. Some examples of headings used by PCH include “High Priority Doc. W-2 Issued” and “CONFIRMED & BINDING Contents Re. Doc W11.” The FTC alleged these headings violated the CAN-SPAM Act’s prohibition against email subject headings that are likely to mislead consumers about a material fact regarding the contents of the email.

The FTC also noted that until January 2019, PCH claimed it did not “rent, license, or sell” consumers’ information to third parties in its privacy policy, while in other sections, it stated that it did share such information, including with marketing cooperatives, advertisers, and publishing companies.

The Order

The FTC’s settlement requires the company to pay $18.5 million, overhaul its user interface, and stop surprise fees. PCH will also be required to delete consumer data collected before January 2019.

While the misrepresentation prohibitions and data deletion requirements aren’t particularly surprising, it is noteworthy that the Orders spends nearly 13 pages laying out detailed, prescriptive disclosure and website design requirements that the company must adopt going forward. For example, on any pages offering both sweepstakes entry and product purchases, PCH must “visually delineate” between the two sections “by using two parallel lines that extend across the webpage.” The company must also use specific, order-mandated disclosure language in various circumstances; the appearance and location of the disclosures are also specifically prescribed by the Order. When displaying products selected by consumers, PCH must provide an “editable list of the Products selected” and following product purchases, PCH must provide a detailed follow-up email containing at least six prescribed categories of information.

In the past, the FTC has generally avoided prescriptive disclosure requirements, relying instead on more general “clear and conspicuous” order definitions. In this order, however, the agency doesn’t seem to be leaving anything to chance.

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A few observations on the settlement. First, “dark patterns” aren’t disappearing into the sunset anytime soon. Companies should make sure website design elements and order checkout experiences don’t take customers on needless loops or obscure material information in the interest of selling (or upselling) products or services. Second, it’s important to remember that sweepstakes laws make it unlawful to require consumers to make a purchase in order to enter. It’s not enough to simply provide an alternate method of entry – companies must ensure that the free option is clearly disclosed and that they don’t otherwise suggest that a purchase is necessary or that it will improve odds of winning. Third, the FTC is much more prescriptive in this order that what we typically see. It’s hard to know whether that’s the start of the new trend related to “dark patterns” allegations, or whether this was driven by the company’s history (which includes multimillion dollar settlements with State AGs in 1994, 2000, 2001, and 2010, as well as a $10 million settlement in a class-action lawsuit). In any event, companies would do well to review and fix practices on their own before the agency comes a-calling.

To address the AG’s disclosure concerns, Grubhub is required to make additional clear and conspicuous app and website disclosures informing consumers about the potential for higher prices with their service. The AG further alleged that Grubhub concealed the fact that it used third party websites to promote certain restaurants using their own routing numbers as contact information, which may have misled customers into believing they were viewing the restaurant’s own contact information. To resolve this allegation, the settlement requires Grubhub to “shut down all Microsites for Pennsylvania restaurants or transfer ownership” and provide a clear and conspicuous disclosure for certain restaurants stating that the company is not an authorized delivery service and directing the customer to the restaurant directly.

Pennsylvania’s settlement follows a March 2022 lawsuit against Grubhub brought by the DC Attorney General. AG Racine raised similar allegations regarding a failure to disclose that prices were higher in store and concealing fees by obscuring them in a tax line item. Attorney General Racine went so far as to refer to these practices as dark patterns, a hot topic for federal and state regulators. The DC Office raised its own concerns about third-party restaurant information, noting how incorrect menu items, prices, and hours would result in errors, delays, or cancellations for a customer’s order. Finally, they added an allegation that Grubhub misled consumers into believing they were supporting restaurants during a Covid-19 pandemic promotion, when local restaurants did not benefit financially from the promotion. The DC office has focused on making sure consumers understand who their payments are benefiting, having previously reached a settlement with DoorDash regarding its tip disclosures.

While the Pennsylvania and DC actions may be focused on food delivery, any businesses that adds usage fees should adhere to some basic principles to ensure they won’t fall on the radar of a State AG:

• Disclose all additional charges.
• Clearly disclose what additional charges are for and who they will be paid to.
• Disclose pertinent information to consumers in making a transaction, ensuring customers understand who or what business their money is really benefiting.
• Ensure any Covid-19 or other charitable promotions or fees are non-misleading.

The FTC’s Complaint

According to the FTC’s complaint, Vonage provides internet based phone service (known as Voice Over Internet Protocol or VOIP) to consumers and small businesses. Monthly charges range from $5-50 for individual customers and can be as high as thousands of dollars for small businesses. In many cases, Vonage signs up consumers using a negative option plan that requires them to cancel by certain date before being charged.

The complaint alleges that, between 2017 and 2022, Vonage provided several ways to sign up for its plans (including online and via toll free number) but made cancellation much more difficult through numerous hurdles. It also alleges that, in some cases, monthly fees continued after cancellation; consumers were charged (or threatened with) undisclosed early termination fees (ETFs); and Vonage provided only partial refunds or no refunds at all. The complaint says that this was all part of a “customer retention strategy” that Vonage pursued despite hundreds of consumer complaints, knowledge among employees, and an earlier settlement with 32 states over similar allegations.

According to the complaint, these practices violated the Restore Online Shoppers’ Confidence Act (ROSCA) (failure to disclose material terms, obtain informed consent before imposing charges, and provide a simple mechanism to stop recurring charges) and Section 5 (charging consumers without their express informed consent).

The Alleged Dark Patterns

The complaint devotes over ten pages to describing the many obstacles (aka dark patterns) Vonage imposed on customers seeking to cancel, clearly intending to send a strong message to other companies that might use similar strategies. Although it’s not clear whether each of these practices alone would be a dark pattern (or law violation), the FTC clearly views them as contributing to the offenses here. Among other things, the FTC alleges that Vonage:

• Allowed sign-up for the service through multiple means but limited cancellation to one method: calling and reaching a live “retention agent” at a special phone number during limited hours.
• Failed to disclose at sign-up that cancellation options would be limited.
• Made it hard to find the special phone number on the website.
• Kept people on hold during extended periods, leading them to give up on requesting cancellation.
• Transferred consumers who called the general customer service number to the special number, causing double wait times and/or dropped calls.
• Subjected those that actually reached a live agent to aggressive sales pitches convincing them to change their minds about cancellation.
• Added even more steps for small accountholders, who had to start with chat support and wait to be transferred or called back (which sometimes didn’t occur).
• Told consumers that tried to cancel that they would owe ETFs (which weren’t clearly disclosed at the outset, and often amounted to the full balance of a long-term contract).
• Used various tactics to cause consumers to miss the cancellation deadline, thus triggering the ETFs.

The Order

The order requires Vonage to pay $100 million in refunds to affected consumers. In addition, like many orders involving negative options, it contains detailed provisions governing the use of such offers – including requirements to disclose the terms of the offer, obtain express informed consent for charges, and provide a simple cancellation process.

However, there are some confusing differences from prior orders – notably, a provision concerning (yes) dark patterns that is extremely broad and vague, especially for an order that could bring contempt charges for violations. Specifically, the order says that the “simple cancellation mechanism” can’t require a consumer to take an action that is “objectively unnecessary to cancel, including using a Dark Pattern,” which the order defines as a “user interface that has the effect of impeding consumers’ expression or preference, manipulating consumers into taking certain action or otherwise subverting consumers’ choice.”

Huh? For companies already struggling to discern the many practices that might be considered dark patterns, this order won’t help. However, there’s plenty of guidance elsewhere, including (in addition to the complaint in this case), the FTC’s recent report on the topic and our earlier blogposts on dark patterns, found here, here, and here).

Some Murky Facts

Finally, one issue in the complaint that’s confusing and potentially significant concerns the ETFs and contract balances. On a quick read, the complaint makes it seem like every customer was “tricked” by a short-term negative option, tried to cancel promptly, was thwarted by Vonage’s “dark patterns,” and then asked to pony up an ETF or the remaining balance on a long-term contract they never agreed to. However, there are suggestions in the complaint that at least some customers weren’t trapped by a negative option but, instead, entered into special deals only available for long-term contracts. (See, for example, the ad reprinted on p. 39 – “$9.99 for 6-Months…with 1-year agreement.”) These two scenarios (negative option vs. long-term contract) are very different, but the complaint fudges them. Dark patterns and fine print aside, is the FTC suggesting that consumers should be able to cancel contracts early with no charges? More clarity here would have been helpful.

* * *

Stay tuned. We continue to track developments at the FTC and are watching in particular for additional cases involving dark patterns.

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The Washington AG’s office recently commissioned an online survey of 1,207 adult Washington consumers “to better understand if consumers have encountered certain advertising and sales practices related to recurring charges and hidden fees.” Although the survey covers more ground, a press release issued by the AG’s office focuses on findings related to subscription services. Here are some of the highlights from the survey:

• 59% of respondents claimed that in the last four years they unintentionally enrolled in a subscription plan that automatically billed them when they thought they were making a one-time purchase.
• Of those respondents, 51% cited a pre-checked box as the reason they unintentionally enrolled. (Not surprisingly, when asked, 70% of all respondents opined that pre-checked boxes should be prohibited.)
• Notably, only 2.75% of respondents reported that they did not cancel the subscription because it was “too difficult to cancel.” Although that’s a small percentage, the AG estimates that this means that approximately 100,000 Washingtonians could not cancel an unwanted subscription.

Companies should take a close look at their automatic renewal practices to ensure they clearly disclose the material terms and minimize the possibility that consumers will be surprised when they see multiple charges. Think carefully about using pre-checked boxes. Although they are arguably not prohibited by law, it’s clear that many regulators frown on them. In fact, some settlements in this area specifically ban companies from using them. Finally, be sure to monitor and address complaints before someone else does.

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We untangled the topic of so-called “dark patterns” in two in-depth blogs earlier this year, available here and here. At that time, we noted there was a common thread between practices that regulators were calling “dark patterns” and practices that have been core elements of consumer protection law and policy for years. We concluded that, despite the catchy new terminology, it did not appear we’d be seeing a new legal standard.

The FTC’s newly released dark patterns staff report may lead us to pause and reconsider. While the majority of identified practices fall squarely within the FTC’s prior enforcement activities (e.g., hidden fees, improper disclosures, bait-and-switch offers), the report also weaves in a handful of practices that may be more of a stretch under existing law, signaling a possible pivot towards more aggressive enforcement activities. Here are a few of them:

• Using shame to steer users away from certain choices, a concept the California Privacy Protection Agency (led by FTC alum Askhan Soltani) has also proposed to include in the draft CPRA regulations.
• Making the free version of a game so cumbersome and labor-intensive that the player is induced to unlock new features with in-app purchases;
• Making users create an account or share their information to complete a task;
• Asking repeatedly and disruptively if a user wants to take an action;
• Making a request that doesn’t let the user permanently decline – and then repeatedly prompting them with the request.

• Asking users to give consent but not informing them in a clear, understandable way what they are agreeing to share, an issue France’s data protection authority has addressed;
• Telling users the site is collecting their information for one purpose but then sharing it with others or using it for other purposes;
• Including default settings that maximize data collection and making it difficult for users to find and change them.

As of this writing, the FTC hasn’t announced any cases challenging practices in these more innovative categories. Some of these same categories have also been discussed by State Attorneys General in recent months at meetings such as the NAAG Consumer Protection conference, but similarly, AGs have been reluctant so far to push the boundaries of which of these practices they believe constitute a violation of state law. We will continue to monitor this issue on both the state and federal fronts and post updates as they occur. In the meantime, companies should give serious consideration (both in light of this FTC development and the emerging state law emphasis on dark patterns) in their product interfaces, disclosure and notice design, purchases flows, cancellation methods, and other consumer communications.

In Part One of this discussion, we provided background on the concept of dark patterns and analyzed some recent examples from State AG enforcement. We concluded that, in alleging dark patterns, State AGs are building primarily on existing precedent governing deception and unfairness but also are trying to push the envelope. Whereas earlier precedent mostly focused on false and hidden information, some of the State’s current allegations lean more towards coercion and the impairment of voluntary action.

In this post (Part Two), we examine the FTC’s approach to this issue, now and in the past. Here, we conclude that, despite the new terminology, the practices that comprise today’s dark patterns have been core elements of FTC law and policy for years. So far – and we emphasize so far – dark patterns is a catchy (and catch-all) name for a variety of longstanding and well-known practices that trick people into making choices that they would not otherwise make.

Dark Patterns Today

During the last year, the main actions the FTC has taken on dark patterns were to (1) hold a workshop on the topic (2) issue a policy statement on their use in negative option marketing, and (3) announce that the FTC’s planned rulemaking on “surveillance-based business models” will address dark patterns.

The workshop identified a range of conduct classified as dark patterns, some of which is classic deception (e.g., not disclosing up-front fees) and some of which would be more of a stretch under existing law (e.g., language denigrating a particular choice, like “no thanks, I don’t want to save money.”) As of this writing, the FTC hasn’t issued a report on the workshop and hasn’t announced any cases challenging practices in the “stretch” category.

Meanwhile, the policy statement on negative option marketing (described in the FTC’s press release as part of a “ramp up” on dark patterns) is largely a summary of prior cases based on the FTC Act, the Restore Online Confidence Act, the Telemarketing Sales Rule, and other laws and rules. The extensive precedent it cites – which includes dozens of cases addressing misleading or hidden disclosures, as well as burdensome cancellation and refund procedures – demonstrates the FTC’s long track record of addressing dark patterns, by whatever name.

Finally, the rulemaking to address “surveillance” and dark patterns has not yet been initiated.

Dark Patterns of Yesteryear

A trip down memory lane reveals an abundance of other FTC actions (beyond negative option marketing) to address the tricks and obfuscation now known as “dark patterns.” Here are just some of them:

• Bait and Switch Guides. First promulgated in 1967, these guides interpret how Section 5 applies to advertising that “baits” consumers with an “an alluring but insincere offer” in order to sell something else, typically at a higher price or on less favorable terms for the consumer. The guides identify as illegal a range of practices that steer consumers to the less desirable option – including disparagement of the advertised product, the refusal to take orders for it, and difficulties and delays in providing refunds for it.
• CAN-SPAM Act/Rule: This Act and Rule from the early 2000s prohibit deceptive email header information, which tricks consumers into opening the email, and requires senders to provide recipients with a simple way to opt out of future emails.
• “Clear and Conspicuous” Requirement: This requirement, which has appeared (in some form) in FTC rules and orders for decades, is designed to ensure that important disclosures (including mechanisms for obtaining consumer consent) aren’t hidden or drowned out by more prominent advertising claims or confusing text. It requires, among other things, that such disclosures, “by size, contrast, location, [and] length of time it appears” stand out from accompanying text so they are “easily noticed, read, and understood.” Also, the disclosures can’t be contradicted by anything else in the communication.
• Ticketmaster case: In this 2010 case against a leading ticket seller, the FTC alleged that the company used bait and switch ads, combined with a deceptive website interface, to cause buyers to click on a link taking them to an affiliated ticket reseller that charged higher prices.
• In app purchase cases: In a series of cases against Apple, Google, and Amazon in 2014, the FTC alleged that the app stores (1) offered “free” games to kids that included incentives for them to make in-app purchases, but (2) failed to disclose to parents that by entering a password, they were authorizing unlimited purchases for a certain time window.
• Payments MD case: In this 2015 case against a payment portal, the FTC charged that the portal used a confusing interface and registration system to trick consumers into signing up for a separate service that harvested their private medical information.

Of course, the fact that “dark patterns” aren’t new at the FTC doesn’t mean they’re not important. To the contrary, it means that the FTC’s renewed interest in this area rests on solid precedent and deserves attention. Just as we stated with respect to State efforts here, companies should take extra care in designing their disclosures, purchases flows, cancellation methods, and other communications to steer clear of marketing techniques that cross the line into dark patterns.

We will continue to monitor this issue on both the state and federal fronts and post updates as they occur.

What are “Dark Patterns?”

There are a number of definitions of “dark patterns” that are bandied about. Darkpatterns.org calls them, “tricks used in websites and apps that make you do things that you didn’t mean to, like buying or signing up for something.” In the Colorado Privacy Act, dark patterns are defined as, “a user interface designed or manipulated with the substantial effect of subverting or impairing user autonomy, decision-making, or choice.” And in the recent Google lawsuits, each State defined dark patterns as, “deceptive design choices that take advantage of behavioral tendencies to manipulate users to make choices for the designer’s benefit and to the user’s detriment.”

In other words, “dark patterns” are practices or formats that manipulate or mislead consumers into taking actions they would not otherwise take, or want to take. In part one of our analysis, we’re going to take a closer look at a couple of recent State Attorney General (AG) multistate actions to see whether “dark patterns” is really a new concept.

Examples from Recent State AG Enforcement

In 2019, the District of Columbia and Nebraska AGs sued Marriott and Hilton respectively alleging deception in their charging of “resort fees.” In neither suit will you find the phrase “dark pattern,” but both cases allege that hotel chains designed the online customer flow to obscure fees, impairing consumers’ ability to comparison shop and ultimately affecting their ability to make an informed choice. While these cases are still pending, the basic deception theory asserted is similar to past AG actions, for example in the subscription service space, where AGs alleged that sales flows that steer consumers into a subscription while failing to prominently disclose the recurring nature of the charge is a violation of their unfair and deceptive trade practice laws.

Last week’s Google lawsuits have a very similar feel. Many of the factual allegations described as “dark patterns” fall cleanly in a traditional deception analysis – for example allegations that Google fails to adequately disclose location collection settings or uses misleading in-product prompts that misrepresent the need for location information or the effect on the functionality of the product. But what about some of the other factual allegations found in the lawsuits, such as Google, “repeatedly ‘nudging’ users to enable Google Account settings” or that Google fails to sufficiently emphasize the advertising and monetary benefits to Google of obtaining location information? Indiana and the District of Columbia both allege that Google is engaging in an unfair practice by “employing user interfaces that make it difficult for consumers to deny Google access to and use of their location information, including making location-related user controls difficult to find and repeatedly prompting users who previously declined or disabled location-related controls to enable those controls.”

But despite calling it a dark pattern – two core components of these allegations hold true in all the enforcement actions discussed: 1) the conduct was allegedly the result of affirmative intentional conduct in designing the product or service, and 2) there was a necessary impact on consumers, impairing their ability to make an informed choice. In other words, it isn’t just that pop-ups or even multiple notices try to persuade consumers to make a choice. Rather, the pop-ups and notices are designed in a way that impairs the consumer’s ability to voluntarily make that choice.

It remains to be seen whether the States will be successful in the actions discussed here, but one should not assume that their use of the phrase “dark patterns” will create a new standard under the law. Indeed, courts will analyze the facts under the legal standard alleged (deception or unfairness) just as they always did. Nevertheless, companies should take note that States may be putting a renewed emphasis on practices and formats that undermine choice, and be sure to seek counsel in designing their purchase flows, cancellation methods, and other consumer communications so they don’t subject themselves to similar allegations.

Stay Tuned for Part Two

In part two, we’ll look at recent FTC enforcement trends and whether or not “dark patterns” are creating a new standard in the federal arena.

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