Agency policy statement puts companies on notice that sign-ups must be clear, consensual, and easy to cancel
This release was updated at October 29, 2021 10:00AM to correct an earlier error.
The Federal Trade Commission issued a new enforcement policy statement warning companies against deploying illegal dark patterns that trick or trap consumers into subscription services. The agency is ramping up its enforcement in response to a rising number of complaints about the financial harms caused by deceptive sign up tactics, including unauthorized charges or ongoing billing that is impossible cancel.
The FTC’s policy statement puts companies on notice that they will face legal action if their sign-up process fails to provide clear, up-front information, obtain consumers’ informed consent, and make cancellation easy.
“Today’s enforcement policy statement makes clear that tricking consumers into signing up for subscription programs or trapping them when they try to cancel is against the law,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “Firms that deploy dark patterns and other dirty tricks should take notice.”
This policy statement builds on the many enforcement actions taken by the FTC and other law enforcement agencies against illegal subscription tricks and traps sometimes used by unscrupulous sellers in automatic renewal subscriptions, continuity plans, free-to-pay or free-to-pay conversions, and pre-notification plans.
The FTC has brought cases challenging a variety of illegal subscription practices. It has sued companies that hid important payment information, or even the fact that consumers would be charged at all, behind hyperlinks, hover-overs or in inconspicuous places or buried on pages beyond the initial offer page. It has sued companies that made consumers wait on hold or listen to lengthy ads before they could cancel. It has sued companies that converted free trials to paid subscriptions before the free trial ended. And, recently, the FTC sued a company that failed to disclose that widely advertised, material benefits of the subscription were no longer available.
Under the enforcement policy statement issued today, businesses must follow three key requirements or be subject to law enforcement action, including potential civil penalties:
- 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. The statement provides detail on what clear and conspicuous means, particularly noting that the information must be provided upfront when the consumer first sees the offer and generally as prominent as the deal offer itself.
- Obtain the consumer’s express informed consent before charging them for a product or services. This includes obtaining the consumer’s acceptance of the negative option feature separately from other portions of the entire transaction, not including information that interferes with, detracts from, contradicts, or otherwise undermines the consumer’s ability to provide their express informed consent.
- 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.
The Commission vote approving the issuance of the enforcement policy statement was 3-1, with Commissioner Christine S. Wilson voting no and issuing a dissenting statement. Commissioner Noah Joshua Phillips also issued a separate concurring statement.
The Federal Trade Commission works to promote competition, stop deceptive and unfair business practices and scams, and educate consumers. Report fraud, scams, or bad business practices at ReportFraud.ftc.gov. Get consumer advice at consumer.ftc.gov. Also, follow the FTC on social media, subscribe to press releases, and read the FTC’s blogs.