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Dark Patterns: FTC Reaches $10 Million Settlement with Children’s Online Learning Program over Marketing and Subscription Practices

Online children’s education company Age of Learning, Inc., also doing business as ABCmouse, has agreed to pay $10 million to settle the FTC’s charges that it made it difficult and confusing for subscribers to cancel their memberships.  The settlement highlights the importance of a compliant subscription enrollment pathway, including readily-accessible cancellation processes.  It also highlights a growing focus by regulators and others on “dark patterns” online marketing techniques.

   ABCmouse operates an “online learning tool… for children ages 2 to 8 years old.”  It provides access to the online learning tool through various paid membership options, typically priced at $9.95 for a monthly membership and $59.95 for an annual membership. In its complaint, the FTC alleged that although the Defendant promised “Easy Cancellation,” in reality membership cancellation was very difficult, which many times resulted in continued costs to the consumers after the point at which they decided to cancel.

       According to the FTC, the Defendant did not post a telephone number or email address to its website for consumers to use to contact to request cancellation. The Defendant did offer an online cancellation mechanism. However, the online mechanism was allegedly difficult to locate, and it “confused, misdirected, and frustrated consumers requesting cancellation.” As a result of these cancellation shortcomings, consumers were charged for memberships they had attempted to cancel.

       As part of the settlement, ABCmouse agreed that, going forward, it will not make any misrepresentations related to negative options, it will make the required disclosures related to negative options, it will obtain express informed consent for a negative option, and it will provide a simple mechanism for consumers to cancel any negative option feature. In addition, the Defendant has agreed to pay a $10 million monetary judgment.

       FTC Commissioner Rohit Chopra issued a separate statement alongside the announcement of this settlement. Commissioner Chopra’s statement focuses on pervasive use of “dark patterns” and provides insight into his thoughts on a way to tackle these practices going forward. The commissioner defined “dark patterns” as “design features used to deceive, steer, or manipulate users into behavior that is profitable for an online service, but often harmful to users or contrary to their intent.” He posits that these “tricks” involve “an online sleight of hand using visual misdirection, confusing language, hidden alternatives, or fake urgency to steer people toward or away from certain choices,” utilizing techniques such as “buttons with the same style but different language, a checkbox with double negative language, disguised ads, or time pressure designed to dupe users into clicking, subscribing, consenting, or buying.”   The commissioner asserted that ABCmouse utilized dark patterns to “lure families into signing up for its service” and then trapped them to “prevent them from cancelling.”   He asserted that the FTC must utilize its enforcement tools to “go after large firms that make millions, or even billions, through tricking and trapping users through dark patterns,” suggesting that a more streamlined approach may be appropriate, as opposed to what he refers to as the “whack-a-mole strategy” that has been employed on issues such as “fake reviews, digital disinformation, and data protection.”

       Takeaway: This recent settlement serves as a reminder to subscriber-based companies to ensure compliance with automatic renewal and cancellation laws and regulations. Further, Commissioner Chopra’s statement suggests that the FTC may focus on “dark patterns” in the future with a more structured approach to enforcement. It remains to be seen exactly what form such enforcement may take.

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