Why Should I Care?
- The Federal Trade Commission (FTC) has brought an enforcement action against Amazon for allegedly tricking consumers into enrolling in Prime membership by using “dark patterns” – deceptive design tactics that trick or trap consumers into making choices they would otherwise not have made.
- The move is part of a general trend of greater enforcement and rule making by the FTC.
- With extensive proposed updates to the Negative Option Rule in the works, the FTC also continues to call out companies that have overly onerous cancellation processes for subscriptions and automatic renewals.
- The Amazon case illuminates the kinds of practices the FTC will likely find deceptive in future cases involving subscription businesses.
The FTC’s action against Amazon marks the latest in the agency’s wave of activity directed at “dark patterns,” including its Staff Report on Dark Patterns and proposed revisions to the Negative Option Rule. According to the FTC, “dark patterns” are “manipulative design elements that trick users into making decisions they would not otherwise have made,” including “coercive or deceptive user interface designs.”
According to the complaint, which was filed in the U.S. District Court for the Western District of Washington, Amazon engaged in dark patterns to trick consumers into signing up for automatically renewing Prime subscriptions and then trap them in those subscriptions by making it difficult to cancel.
The complaint highlights several of Amazon’s allegedly deceptive practices – practices that will continue to be in the line of fire in future FTC enforcement actions regarding subscription law.
Companies that offer subscription-based products and services should be on the alert about the following practices and take steps to audit their e-commerce flows to avoid facing significant penalties.
The FTC’s Prime Targets: Dark Patterns
As mentioned above, dark patterns refer to practices used by businesses to force consumers to take an action they would otherwise not consent to. There are several practices deemed as dark patterns by the FTC, including:
The complaint accuses Amazon of failing to get consumers’ “express informed consent” before charging them for transactions. Moreover, the complaint accuses Amazon of intentionally making user experience design decisions that would prevent a reduction in non-consensual enrollment.
The FTC recently proposed a rule to make it easier for consumers to click to cancel. “Some businesses too often trick consumers into paying for subscriptions they no longer want or didn’t sign up for in the first place,” said FTC Chair Lina Khan. “The proposed rule would require that companies make it as easy to cancel a subscription as it is to sign up for one. The proposal would save consumers time and money, and businesses that continued to use subscription tricks and traps would be subject to stiff penalties.”
In an attempt to upsell consumers, Amazon allegedly forced consumers to choose whether or not to enroll in Prime before they could complete their transaction. For example, Amazon presented customers with “at least one . . . and often several opportunities” to enroll in Prime, according to the complaint, and customers had to select either the “prominent” enrollment button or the “inconspicuous” decline link before they could proceed. Amazon also made cancellation a challenge, “forc[ing] the consumer to proceed through multiple screens to cancel their subscription.”
According to the FTC, Amazon designed its interface to give certain information priority over other information. For example, Amazon:
- Displayed the terms and conditions of Prime membership only once during the purchase process and did so in a “small, easy-to-miss” font.
- Used repetition and color to focus customers’ attention on the “free shipping” that comes with Prime membership rather than the price of the subscription.
- Tried to get customers not to cancel by redirecting them to other options and displaying warning icons that “[evoke] anxiety and fear of loss in consumers.”
Obstruction, or the “Roach Motel” Technique
The complaint alleges that Amazon made it unnecessarily difficult to decline enrollment in Prime. Moreover, the company used marketing and reconsider options to try to change the minds of customers who had already expressed an intent to cancel.
Amazon also allegedly offered consumers asymmetric choices to steer them toward enrolling in or continuing Prime subscriptions. For example, Amazon presented a link to decline Prime membership that was far less prominent than the link to enroll.
The company also made it easier to abandon than to complete a cancellation attempt, including by using animations, colors, and text to point consumers to options like “Remind me later” and “Keep my benefits” rather than “Continue to cancel.”
The FTC accused Amazon of “hiding or disguising relevant information, or delaying its disclosure” so as not to dissuade consumers from signing up. For example, Amazon hid Prime’s price and auto-renewal terms in consumers’ carts and made Prime’s terms and conditions hard to find during the purchase process.
Finally, Amazon allegedly used “emotive wording around the disfavored option”— i.e., cancellation — “to guilt users into selecting the favored option” — i.e., enrollment or continuation. While the exact wording of Amazon’s confirmshaming was redacted in the complaint, a classic example is “No, thanks. I like full price.”
Objecting to Complicated Cancellation Processes: New Subscription Law?
The FTC also called out Amazon for complicating cancellation for consumers, in violation of the Restore Online Shoppers’ Confidence Act (ROSCA), which governs internet transactions. For example, customers could sign up for Prime easily on any device with a two-click process.
However, to cancel, customers had to call customer service or go through a “labyrinthine” process that involved “a four-page, six-click, fifteen-option cancellation process” that Amazon dubbed the “Iliad Flow,” in reference to Homer’s epic about the long, arduous Trojan War.
The FTC’s focus on Amazon’s “fail[ure] to provide simple mechanisms for a consumer to stop recurring charges” also reinforces the agency’s proposed “mirror cancellation” and “click to cancel” updates to the Negative Option Rule.
If you haven’t been focused on subscription compliance to date, now is the time to wake up. Businesses should take this time to:
- Audit their sign-up flows, disclosures, and affirmative-consent mechanisms to ensure compliance with the FTC’s guidance.
- Take a close look at cancellation flows to ensure they are sufficiently simple and easy to find. Remember, “mirror cancellation” doesn’t mean a 17-step sign up allows you to offer a 17-step cancellation mechanism!
- Take a close look at design practices and consumer retention efforts to ensure they are not manipulating consumers to follow a certain path or purchase flow. The FTC is going to crack down on the use of shading, confirmshaming, upsells, and other “save” tactics.
The FTC is stepping up its rule-making activities, not only with the proposed updates to the Negative Option Rule but also with the updated Endorsement Guides that it unveiled last month and its proposed Rule on the Use of Consumer Reviews and Testimonials.
Businesses in the subscription industry should closely monitor these developments and also review their enrollment and cancellation processes to ensure they do not run afoul of the FTC’s current and proposed rules.