Online businesses employing “sneaky” tactics such as making it near-impossible to cancel a subscription or hiding the real cost of an item are being targeted as part of a federal government crackdown on unfair trading practices.
Assistant Competition Minister Andrew Leigh has unveiled plans for legislation to ban certain online sales tactics and introduce penalties for some actions, including ‘drip pricing’ and subscription traps.
Leigh outlined the reforms in a speech on Monday, saying they already have the backing of state and territory governments and that unfair trading practices serving to trick or distort the decision-making of consumers would be restricted.
“They drain time and money, but they also erode trust,” Leigh said.
“They shift advantage towards firms that design obstacles and away from those that invest in clear products and straightforward service.
“Left unchecked, these practices make our economy less dynamic by discouraging people from exploring alternatives or trying new providers.
“A competitive system cannot thrive when confusion becomes a strategy and clarity becomes a disadvantage.
“This reform also helps shape the kind of economy we want. An economy where prices are what they seem and where people can leave a service as easily as they join it.”
Navigating the cancellation of a subscription maze
The two main deception tactics that will be outlawed are subscription traps and ‘drip pricing’.
Subscription traps involve users finding it extremely difficult to end a subscription once they have signed up to it.
According to Consumer Policy Research Centre estimates, this is costing Australians $46 million per year.
This can involve companies making it easy for users to sign on to a subscription at major discounts or for free, but then quickly jacking up the price and forcing consumers to effectively navigate a maze to cancel it.
‘Drip pricing’ involves extra hidden fees not being disclosed to consumers until they are at the checkout point.
“Australians have had enough of signing up for a free trial only to be hit with surprise charges or finding out the real cost of purchase at the very last click,” Leigh said last week.
“[Companies will] be required to disclose key information before signing customers up for a subscription, notify customers before a free trial ends, and remove unreasonable barriers to cancellation.
“We’re also strengthening protections on drip pricing by forcing businesses to show mandatory transaction fees prominently and upfront, so Australians know the real price before they buy.”
The new legislation will include a general ban on practices that “manipulate consumer decision-making” and cause harm and specifically target these forms of sneaky tactics.
The legislation will be released for consultation early next year.
Opposed by the Tech Council
Treasury began consulting on these reforms late last year.
In a submission to this consultation, the Tech Council of Australia – which represents Apple, Microsoft, and Google, amongst others – railed against the proposed changes and backed the status quo instead.
The organisation said that subscription traps should only be outlawed “where there is clear, material, financial harm arising to consumers”.
The Tech Council said that “cancellation is a very different process than signing up” and that the “ease of sign up should not be the measuring stick for cancellation”.
A rule on subscription traps could “have the opposite of the intended effect” if businesses were then compelled to make the sign-up process more complicated to justify the cancellation process, the representative body said.
It also said that making businesses provide “prescriptive lists of specific information” to avoid drip pricing could lead to consumers zoning out and not paying attention.
