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Sandhya Brown of the FTC · COMPLY: The Marketing Compliance Podcast

• 0:07
  Speaker 1: Hey there, comply podcast listeners and welcome to this week's episode. This week's podcast features a very special guest, Sandia Brown, assistant director and the division of Financial Practices at the ftc. This past year, the FTC issued their staff report on dark patterns and also brought a number of cases involving dark patterns including Credit Karma, epic Games, and Vonage. Name a few. They've also initiated Rulemakings in a few areas related to dark patterns, in particular junk fees, and click to cancel. Listen as she talks about the staff report, key aspects of the cases they brought the rulemaking proposals and tips for compliance. Thanks for listening and enjoy.
• 1:01
  Speaker 2: Hello everyone, it's good to be back with you. My name is Sonya Brown and I am an assistant director in the Division of Financial Practices. At the F T C I work on and supervise a range of consumer protection matters in the financial services space, and I'm looking forward to sharing my perspective on what the FTC has been up to and what lenders and others in the financial marketplace should keep in mind in terms of compliance and consumer protection. Before diving in, I wanna note that everything I say today reflects only my own thoughts and opinions. I'm not speaking on behalf of the commission or any individual commissioner or the Bureau of Consumer Protection. I plan to focus my discussion today on dark patterns, a topic that we've been bringing a fair amount of attention to and that I touched on briefly the last time I spoke at Comply. First, I'll briefly refresh on what dark patterns are and why we're focused on them. Second, I'll give a brief overview of our bringing dark patterns to light staff report that was issued in September. And finally, I'll give you some recent case examples and describe some rulemaking we have in the works. Okay , so to refresh, what are dark patterns? Dark patterns are design practices that trick or manipulate consumers into making choices they would not otherwise have made and that may cause harm. They often take advantage of consumers cognitive biases to steer their conduct or they delay or deny access to information needed for consumers to make fully informed decisions. So what's new? Why is the FTC addressing dark patterns now and why does it matter? Well, as more and more commerce has moved online, so have manipulative design practices and compared to their brick and mortar analogs, these digital tools can be deployed at much larger scale and with more sophistication, creating bigger problems for consumers. Also, data collection has become pervasive. Companies now have techniques to gather massive amounts of information about consumers, identities and online behavior. They can then use that data to target their tactics at particular demographic groups or even in individual consumers. Plus companies that market online can experiment with digital dark patterns more easily f frequently and at much larger scale than traditional brick and mortar retailers to determine which design features most effectively influence consumer behavior. And finally, as consumers increasingly use and rely on newer technologies that affects the number and types of dark patterns they're likely to encounter. And dark patterns tend to have stronger effects when they're stacked on top of each other. So next I'd like to share a bit from the FTCs Dark Pattern staff report that we released in the fall. It's actually a quick and easy read. Lots of pictures actually, and I would encourage you all to take a look at it. The staff report is organized around four categories of consumer protection harms implicated by dark patterns. So I'm going to touch on each of those four briefly now, and I'll offer some tips on compliance with respect to each. So the first category includes design elements that induce false beliefs. This is where a company uses design features to make outright false claims or create a misleading impression about itself or the product. Classic examples include advertisements that are formatted to look like news articles and fake countdown clocks that make consumers think a good deal is about to disappear. So some tips here to comply with the FTC app . Companies should make certain that their online interfaces do not create false beliefs or otherwise deceive consumers overall when designing user interfaces, businesses should look not just at the effect their design choices have on sales, click through rates or other profit based metrics, but also on how those choices affect consumers understanding. And if a business becomes aware that a particular design choice manipulates consumer behavior by inducing false beliefs, the company should remediate the problem, not capitalize on it for profit. The second category of dark addressed in the report involves design elements that hide or delay the disclosure of material information. So examples of this are burying key information about a product in dense terms and conditions that consumers don't see before purchase or tricking people into paying fees by hiding their existence behind obscure links in long blocks of text or at the bottom of a website requiring lots of scrolling to find. Another example is what's called drip pricing, where companies lure consumers in by advertising only a part of the product's total price and don't mention other mandatory charges until late in the bry process after the consumer has sunk time into selecting the product and foregone other opportunities. So takeaways for this category, companies should include any unavoidable or mandatory fees in the upfront advertised price. And companies should not deceive consumers into believing that optional products or fees are mandatory when they're not. The third category of practices we talk about in the report are design elements that lead to unauthorized charges. This often involves tricking someone into paying for something they did not want or intend to buy. Examples include companies automatically adding items to a consumer's online shopping cart that the person hadn't selected, or free trials that turn into recurring subscriptions without the consumer's authorization. A related dark pattern involves making it hard for consumers to cancel existing subscription services resulting in unwanted ongoing charges. So how can companies obtain consumers express informed consent to charges? At a minimum, companies should make sure their procedures for obtaining consent include an affirmative un unambiguous act of consent by the consumer who is being charged. Acceptance of general terms and conditions, documents that contain unrelated information, not enough. And with respect to cancellation negative option , sellers should provide cancellation mechanisms that are at least as easy to use as the method the consumer used to buy the product or sign up for the service. I'll be talking more about this in a bit. The final category the paper addresses involves DESI design elements that obscure or subvert consumer's privacy choices. Because of dark patterns, consumers may be unaware of the privacy choices they have online or what those choices might mean. This may result in a significant deviation from consumers actual privacy preferences, including unwanted sharing of their personal information. So a few tips when it comes to consumer privacy. First, companies should collect information only when the business has a justified need for collecting that data and should avoid default settings that lead to collection, usage, or sharing of consumers' information in ways they wouldn't expect. Second, companies should make privacy choices easy to access and understand. Con consumers should not have to navigate through numerous screens to find privacy settings or have to look for settings buried in a privacy policy or a company's terms of service. They should be presented at a time and in a context in which the consumer is actually making a decision about their data. And lead generators must be honest about who they are and why they're collecting consumer's information. If a company represents that they're collecting information for what audience or for one purpose, they cannot share it with a different audience for a different purpose without consent. Finally, I'm going to describe a few recent cases and rulemakings that the agency has announced to help illustrate the types of practices we have in our sites. Our recent case against Credit Karma is a good example of dark patterns that manipulate consumers into action. By inducing false beliefs, we allege that Credit Karma knowingly ran a deceptive marketing campaign where they sent email credit card offers to their members saying that those members had been quote , pre-approved for a credit card when they hadn't actually been approved at all up to one third of those users who applied for certain credit cards or actually denied the credit card following a credit check. Worse, unbeknownst to the users, those credit checks were hard pulls , meaning the kind of credit check that can damage your credit score. So not only were those consumers left without the promised credit card, but also with potentially worse credit scores when they applied. So we alleged that Credit Karma chose to make that pre-approval claim after it conducted comparison testing to see how consumers reacted to different types of claims about the credit card offer. It tested the pre-approval claim against, for example, a claim that told consumers they had excellent odds of being approved . Credit Karma's testing showed that the false pre-approved claim yielded a greater quick click rate, and that's the claim. Credit Karma ultimately decided to use this type of design. Experimentation if it results in deceiving consumers or manipulating them into taking unwitting or detrimental actions is a sign of dark patterns. At work. Our settlement with Credit Karma puts a stop to the deceptive claims, requires them to preserve the results of all digital experimentation and will have them paying 3 million that will send to consumers for their lost time applying for credit card offers they were ultimately not approved for. Another interesting case is our case against Vonage, which is a good example of dark patterns related to subscription services and cancellation. So Vonage provides internet-based telephone services to consumers and and businesses and bills our customers for these services on an automatic basis every month. We alleged that Vonage allowed consumers to easily sign up online, but made the cancellation process much more difficult leaving consumers and businesses on the hook for services they no longer wanted specifically, rather than letting them cancel online, which is how many of them had signed up. Vonage required canceling customers to speak to a live retention agent over the phone, but Vonage made finding and talking to those agents exceedingly difficult. The company obscured the cancellation contact information on its website, made those a agents available only during set hours, created procedures that sent customers in a circle and made customers suffer lengthy and repeated sales pitches before they could cancel. Many consumers also faced long hold times dropped or unanswered calls and unreturned chat messages if customers somehow made it through all that . Anyway, they were then confronted with unexpected high dollar early termination fees that were not disclosed clearly upfront . So under our settlement, Von has to stop unauthorized charges, be upfront with consumers about the subscription plans and how they work put in place a simple cancellation process that is easy to find, easy to use and will be available through the same method the consumer used to enroll and they have to stop using dark patterns to frustrate consumers cancellation efforts. So I'll note here that we are actually in the midst of a rulemaking that would require companies to provide an easy way to stop recurring charges, what we call click to cancel designing cancellation as a sort of maze or endless loop to steer consumers away from. What they're trying to do is a dark pattern, and this rule is aiming to put an end to that. So here's the gist of the rule. There has to be a simple cancellation mechanism for consumers to immediately halt any recurring charges. The mechanism has to be at least as simple as the one used to sign up, and it has to be through the same medium that the consumer used to sign up , whether that's through the internet, telephone mail in person or something else. So for the internet, the mechanism must be accessible on the same website or app used for signup for the phone. All calls have to be answered during normal business hours. So the next case, and last case I'll mention is our case involving Fortnite against the company Epic Games . So this one is a good example of a dark pattern that tricks consumers into paying for something they do not want or intend to buy . In December, we announced a settlement that will require the company to pay more than 500 million for charging users without authorization. And for violating hapa , which is a statute meant to protect children's privacy online, we allege that Epic designed its purchase flows within Fortnite so that millions of users were charged for unwanted items while playing the game. Players were automatically and immediately charged for items based on the press of a single button, even when consumers had no idea they'd be charged. So for example, epic changed the button configuration on the console so that users who pressed a button that was normally used to preview an item was now configured as the purchase button. Users were also unexpectedly charged for pressing a button when trying to wake the game from sleep mode or during a loading screen. On top of that, epic also made it hard for people to undo charges by shrinking and obscuring the cancel button, so fewer players would notice it in internal communications. They even admitted that the cancellation process was a dark pattern. Epic received a high volume of complaints about all of this, but refused to fix its practices for years. Under our order, epic will be required to pay 245 million that we will make sure goes back to consumers to be refunded for charges they never authorized. And going forward, they must stop charging consumers through the use of dark patterns and without their authorization. So speaking of unauthorized charges, I will make a final note about another rulemaking that the FTC has underway. And this one is a rulemaking where we're going to consider prohibiting unfair deceptive fees, including fees that consumers haven't consented to and fees for fake or worthless products and services. The comment period for that, A N P R closed in January and now the agency will be assessing the comments and considering a proposed rule. So that concludes my remarks today. Thank you so much for your time.
• 18:45
  Speaker 1: Thanks for listening to this episode of the Comply podcast. If after today's podcast you're interested in learning more around dark pattern compliance, we have several resources that I will drop for you in today's show notes. As always, for latest content on all things marketing compliance, you can head to content dot for frontline.com and for the most up-to-date pieces of industry news events and content, be sure to follow up her frontline on LinkedIn. Thanks again for listening and we'll see you next time .