Is your direct-to-consumer company using “dark patterns” on its website?

Dark patterns are generally understood to mean practices that mislead or manipulate consumers into taking actions that do not reflect their true intent, choices or consent.

Federal and state regulators have responded with increased scrutiny of these practices, bringing several high-profile enforcement actions against companies for employing them.

Read on to find common examples of dark patterns, a summary of the major enforcement actions and related legal and regulatory developments in recent years and suggestions of best practices for companies that use dark patterns as part of their online marketing mix.

Examples of dark patterns

Following are examples of dark patterns that commonly appear on consumer-facing websites:

• Making false claims about demand (e.g., “10 other people are looking at this room right now”) or inventory (e.g., “Only two rooms left at this price”) in order to encourage an immediate purchase
• Similarly, creating pressure to buy through use of a countdown clock
• Making it difficult to compare prices or cancel a transaction
• Using pre-checked boxes or “opt-in” defaults
• Advertising only part of the price initially (known as “drip pricing”)
• Requesting personal information that will be used in an unauthorized manner
• Making it easy to sign up for a subscription or membership, but hard to cancel.

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Laws, regulations, and enforcement actions

Federal regulators — namely, the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB) — are increasingly focused on dark pattern behaviors as a basis for antitrust and other types of liability.

The FTC considers dark patterns to be “unfair or deceptive” business practices under Section 5 of the FTC Act, and a September 2022 FTC Staff Report titled “Bringing Dark Patters to Light” made clear that “these practices are squarely on the FTC’s radar.” A 2023 CFPB Policy Statement on Abusive Acts or Practices likewise referenced “manipulations such as the use of pop-up or drop-down boxes, multiple click-throughs, or other actions or ‘dark patterns.’”

In the last two years, enforcement actions brought by these agencies include:

• FTC v. Amazon (2023): Alleged the company used dark patterns to trick customers into enrolling and automatically renewing Prime subscriptions; case is currently pending.
• FTC v. Vonage (2022): Alleged the company made it difficult to cancel service, imposed early termination fees without clear disclosure and charged customers after cancellation request; Vonage settled for $100 million.
• FTC v. Credit Karma (2022): Alleged the company falsely said consumers were “pre-approved” for a credit card; Credit Karma settled for $3 million.
• CFPB v. One Main (2023): Alleged the company manipulated customers into purchasing add-on products; One Main settled for $20 million.
• CFPB v. TransUnion (2022): Alleged the company misrepresented the cost of services. The case is currently pending.

At the state level, several recently enacted data privacy laws — including those in California, Colorado and Connecticut — explicitly exclude agreements obtained via the use of dark patterns from the definition of valid consent. Violations of these regulations come with severe penalties, including fines ranging from $5,000 to $20,000 per violation.

And individual litigants have also taken notice. There are currently pending consumer finance class actions involving claims under the Unfair, Deceptive, or Abusive Acts or Practices statute, the Truth in Lending Act and other laws.

All of this underscores the point: Where dark patterns are employed, the potential exposure to liability is significant.

Suggested best practices

Given the potential legal risks, companies that use dark patterns in ecommerce should consider the following best practices:

• Prevention
  • Establish a formal compliance program
  • Have in-house or outside counsel review e-commerce marketing
  • Monitor consumer experience and respond to complaints

• Review and testing
  • Understand the ecommerce tools you are using
  • Consider engaging a third-party testing company to evaluate the effect of the tools
  • Focus on key decision points and presentation of material information (such as prices)

Additionally, companies should bear in mind that, when it comes to dark patterns, the most effective tools with respect to revenue generation can also be the riskiest from a legal standpoint.

And as always, be careful what you put in writing. Emails among business people discussing use of these practices can later serve as powerful evidence of bad intent.

Kim’s Korner is a series of articles by Ballard Spahr’s emerging company and venture capital attorneys. The column is not legal advice. The substance of the column is derived from our experience working with founders and details many of the current critical issues facing startups.

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This is a sponsored guest post by Ballard Spahr. Ballard Spahr is a Technical.ly Brand Builder client.