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FTC Reaches $100 Million Settlement With Vonage Over Subscription Practices

Internet phone service provider, Vonage, has agreed to pay $100 million to settle the Federal Trade Commission’s charges that it imposed fees and made it difficult for subscribers to cancel their service. Specifically, the FTC alleged that Vonage implemented “dark patterns” to create obstacles for subscribers looking to cancel their services, often resulting in consumers being charged even after they had requested cancellation. This settlement highlights the FTC’s continued focus on “dark pattern” marketing techniques, particularly as they are applied to cancellation of automatically renewing subscription arrangements.

As stated in the FTC’s complaint, Vonage provides communication services, including Voice over Internet Protocol (“VoIP”) phone services to residential and small business consumers. Vonage’s services automatically renew and its customers are charged on a recurring basis. According to the complaint, since at least as early as 2015, Vonage has failed to provide a simple cancellation method, and has instead employed a “panoply of hurdles” that “deter and prevent customers from stopping recurring charges.”

Specifically, the FTC states that although Vonage allows customers to sign up for its services online, it requires customers seeking cancellation of the services to speak to a “retention” agent over the phone. Moreover, according to the FTC, Vonage makes it difficult for customers to reach a live agent, and even when they do, customers are met with lengthy and repeated sales pitche, and unexpected high-dollar early termination fees. Finally, the FTC alleged that due to the cancellation process being an “endless loop,” there have been cases where consumers have been charged after requesting cancellation.

In addition to the significant monetary component, as part of the settlement, Vonage agreed to provide consumers with a simple mechanism to cancel a negative option feature, and specifically agreed that where consumers enter into an agreement to purchase a good or service including a negative option feature over the Internet or a mobile phone application, that the cancellation mechanism must be provided through the same website, email address, or other application that the consumers used to enter the agreement. Further, Vonage agreed to ensure that it has express, informed consent before charging a consumer, and to clearly disclose the terms of any negative option plan to consumers.

Takeaway: This recent settlement serves as a reminder to subscriber-based companies to ensure compliance with automatic renewal and cancellation laws and regulations. The terms of this settlement also further clarify the FTC’s interpretation of what constitutes a simple cancellation mechanism.

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