Digital giants’ use of ‘subscription traps’ and other manipulative tactics are causing “significant and growing consumer harm”, a new Treasury analysis has warned as the ACCC cracks down on ‘dark patterns’ that trap Australians with unwanted recurring subscriptions.
Despite being one of a range of ‘unfair trading practices’, dark patterns “are not currently prohibited by our consumer and competition laws”, the Treasury Consultation Regulation Impact Statement (CRIS) notes in warning that “evolving market trends have altered, and continue to alter, the risks posed to consumers”.
Citing Consumer Policy Research Centre (CPRC) research that last year found 83 per cent of Australians have experienced negative consequences from a website or app using design features to influence their behaviour, Treasury is soliciting feedback on policy options to address legal shortfalls that allow digital giants to continue using such practices.
Treasury’s crackdown will gain further momentum later this month, when the ACCC’s seventh Digital Platform Services Inquiry (DPSI) report floats a range of competition and consumer concerns relating to digital platform providers’ expanding ecosystems.
Dark patterns – which, the CPRC found, led one in four Australians to share more personal information than they wanted to and made younger consumers 65 per cent more likely to spend more than they intended to – secure ongoing revenues by trapping consumers in subscriptions that they later find hard to cancel.
This, even though 58 per cent of respondents said they were aware that organisations use “specific types of design features” to influence their behaviour.
The European Data Protection Board (EDPB) outlines six categories of dark patterns including overloading, skipping, stirring, hindering, fickle, and ‘left in the dark’ – which include overwhelming users with large numbers of requests, designing user interfaces or experiences so that users forget what they wanted to do, using emotional or visual ‘nudges’ to encourage certain actions, obstructing users from learning about use of their data, making interfaces inconsistent and unclear, and flat-out hiding information or privacy controls from consumers.
Such activities are under scrutiny as the ACCC pushes for an Australian prohibition on unfair trade practices – with one possible solution, the ABC has reported after viewing an advance copy of the ACCC report, the implementation of its so-called ‘don’t be a jerk’ laws.
Regulating ‘dark patterns’ was named as a key 2023 enforcement priority for EU consumer regulators, with regulations already implemented to kerb manipulative behaviours that were, one European Commission study of 399 online operators found, used by 37 per cent of companies.
A prohibition on such practices “will assist consumers and small businesses exposed to manipulative practices designed to get them to agree to unfair or unfavourable [contract] terms,” ACCC chair Gina Cass-Gottlieb told the National Press Club in a speech earlier this year, in which she argued that “urgent reforms are needed”.
“Stronger consumer protections online and in the general economy,” she said, “would support consumer trust in business required to engage with and fully benefit from new and innovative products.”
Digital giants in the crosshairs
Even as Treasury and the ACCC ramp up local rhetoric about subscription traps, overseas regulators have dropped the hammer – with the US Federal Trade Commission (FTC), which has been warning about dark patterns for years, lodging a formal complaint against Amazon for “knowingly making it difficult for consumers to cancel their subscriptions” to its Prime membership program.
Amazon not only used dark patterns “to trick consumers into enrolling in automatically-renewing Prime subscriptions,” the FTC alleges, but “knowingly complicated the cancellation process for Prime subscribers who sought to end their membership.”
“The primary purpose of its Prime cancellation process was not to enable subscribers to cancel, but to stop them.”
Amazon executives “slowed or rejected changes that would’ve made it easier for users to cancel Prime because those changes adversely affected Amazon’s bottom line,” the agency argued, with chair Lina M. Khan saying the “manipulative tactics harm consumers and law-abiding businesses alike.”
The outcomes of that case will be closely watched in Australia, where digital giants are already arguing against the need for intervention.
Apple, which outlined the five steps necessary to cancel subscriptions in its DPSI submission, says it remains “clear and transparent” about its practices and pricing – a claim echoed by Google, which said that it provides “transparent pricing information and detailed instructions for changing their subscriptions.”
Microsoft warned against “broad generalisations”, advising that “it is critical that [regulations] be used only to address conduct for which there is strong evidence of actual significant competitive harms.”
And Amazon, for its part, warned against “speculative and incorrect findings” about digital giants’ practices – arguing in its submission to the latest DPSI report that “general competition law in Australia is well designed and effective, and competition-related regulatory intervention should be targeted to high-risk areas to avoid inhibiting productivity-enhancing investment and innovation.”
