Sharp marketing practices have been around since humans started trading, but it is generally acknowledged that the opportunities for, and the ‘pulling power’ of, unscrupulous or misleading marketing are supercharged online. As the New York Times has said:

“with the benefit of real-time user data and the ability to quickly change online interfaces, dark patterns can be far more effective — and diabolical — than offline tricks. Protections that offline consumers enjoy, like cooling-off periods after buying a car, typically don’t apply to online transactions.”

Regulators globally are starting to launch an assault on so called “dark patterns”. To give this some context, one study found that 1 in 10 ecommerce sites use dark patterns. If you’re perplexed by the somewhat ominous sounding “dark patterns”, you can get up to speed here – where we discussed what dark patterns are, and how the California Consumer Privacy Act was the first major legislative move against dark patterns. Both the Australian Competition and Consumer Commission (ACCC) in Australia and the Federal Trade Commission (FTC) in the US have recently joined the fray.

The ACCC’s thinking on dark patterns

On 28 October 2021, as part of its “Digital Platform Services Inquiry”, the ACCC released its third Interim Report (as part of its 5-year review into digital platform services) (Interim Report). The Interim Report focusses on search defaults and choice screens (these are screens that allow users to pick default internet browsers or search engines, rather than having these automatically chosen by the device). The Interim Report is generally concerned with the pre-installation of browsers on devices and default search engine arrangements, and the adverse effects these practices have on competition.

For the first time, however, the ACCC has also turned a specific and critical eye to the use of “dark patterns”, and has proposed that further regulation will be required in this space. The ACCC has defined dark patterns as those elements of the user interface (or UI) designed to make it “difficult for users to express their actual preferences, or which nudge users to take certain action that may not be in their best interests”.

The ACCC discusses how dark patterns are enabled or implemented by "choice architecture" for internet browsers and search engines, which refers to UI design that influences user choices. While choice architecture doesn't have to be negative - positive choice architecture can be used to facilitate increased consumer choice and make the process of changing default settings simple - the ACCC notes that the following design techniques are the most common types of dark patterns used:

1. Obstruction / friction - where processes are made more difficult due to the browser discouraging certain actions. This can occur through constant warning signs by a browser, e.g. warning a user against changing default settings or installing extensions. Another example might be where browsers move important settings (like changing the default search engine) to the bottom of a settings page or obscure them within menus – making it harder and less intuitive to access that particular setting.
2. Misdirection - which involves the use of visuals, language and emotion to drive users towards a particular choice. A classic example might be popups when using a particular search engine, suggesting that users should consider switching their default to that search engine because it is "faster" or more "secure".
3. Nagging - the use of interruptions or continuous pop-ups unrelated to what users are doing. This could be unwanted pop-ups suggesting that a user change their search engine or install a different browser.

At this stage, the ACCC has not proposed any definitive action, but it canvasses some approaches. One suggestion the ACCC makes to address the negative use of dark patterns is the imposition of a principles-based obligation on platforms, which would require platforms to refrain from using dark patterns or negative choice architecture. This would require platforms to re-design the UI of their browsers and moderate the way in which they bundle services and promote their own services.

Details at this stage are scant, and exactly what such an obligation would entail and how enforcement would work has not been specified. However, the ACCC explicitly notes that it takes inspiration from the UK Competition and Markets Authority’s (CMA) proposed “Fairness by Design Duty” (Duty), which the CMA has recommended be imposed on online platforms as part of a Code of Conduct. Under the Code of Conduct, platforms would be required to demonstrate compliance with the Duty – for example, by actively monitoring user knowledge levels and running experiments to improve choice architecture. It is possible that the ACCC could attempt to replicate a similar, codified duty in Australia.

Another suggestion made by the ACCC – and one that recognises that dark patterns are used ubiquitously by online service providers – is to introduce a prohibition on unfair trading practices. To be fair, this is not the first time the ACCC has recommended such a prohibition (see for example its 2019 Digital Platforms Inquiry Final Report), and the introduction of such a prohibition would have an impact well beyond dark patterns (and even the digital economy). Nonetheless, the ACCC considers the use of dark patterns to be an example of a practice which could be addressed through the introduction of such a prohibition.

The FTC’s steps to address dark patterns

On 28 October 2021, the FTC, which has oversight of US federal consumer protection laws, issued enforcement guidelines on a type of dark pattern called a ‘negative option offer’.

Negative option offers come in a variety of forms, but all share the central feature of a contract term under which the seller may interpret a consumer’s silence or failure to take affirmative action to reject a good or service or to cancel the agreement as acceptance or continuing acceptance of the offer. We all have seen ‘free trial marketing’ which provides consumers the opportunity to receive goods or services for free (or at a nominal fee) for a trial period. After the trial period, sellers can automatically begin charging a fee (or higher fee) unless consumers affirmatively cancel or return the goods or services.

While the FTC enforcement guideline covers telemarketing and snail mail marketing, its focus is on online negative options. While not saying negative options are per se illegal, the FTC sets some high hurdles built around three requirements: disclosure, consent and cancellation.

On disclosure, the FTC requires that the visual disclosure of the negative offer option, by size, contrast, location, the length of time it appears, and other characteristics, should stand out from any accompanying text or other visual elements so that it is easily noticed, read, and understood. No relegation to the small print!

The negative option feature itself must appear immediately adjacent to the means of recording the consumer’s consent for the negative option feature. The other terms and conditions must appear before consumers make a decision to buy (e.g., before they “add to shopping cart”).

The disclosure should not be contradicted or mitigated by, or inconsistent with, anything else on the web site. An example of an inadequate disclosure is one where the consumer sees an offer upfront on the landing page of a website which is materially different from the terms of the offer presented on later web pages for the ordering process.

On consent, the FTC said that the seller must obtain the consumer’s positive acceptance of the negative option feature offer separately from any terms and conditions. A “pre-checked” box (a la Donald Trump’s campaign fundraising web site) does not constitute unambiguously affirmative consent to the negative option feature.

On cancellation, the seller must provide a simple, reasonable means for consumers to cancel their contracts. To meet this standard, negative option sellers should provide cancellation mechanisms that are at least as easy to use as the method the consumer used to initiate the negative option feature. The seller cannot attempt to ‘save’ the sale by promoting another product. If the customer can cancel by phone, there must be no extended ‘waiting on hold’.

All online service providers affected

Any regulation of dark patterns by the ACCC in Australia would affect online service providers generally, not just browsers, and given the ubiquity of dark patterns it’s likely that a significant proportion of online service providers could be impacted.

For the time being, businesses can take some steps to avoid encountering issues by ensuring that an appropriate balance is struck between commercial interests and valid concerns such as maintaining security, and user interests, in the design of user interfaces. This could include, for example, ensuring “paths” do not overly favour commercial interests over user interests, and, generally, by ensuring settings (even those that may go against a business’ commercial interests) are easily accessible for consumers and optimise consumer choice where possible. The FTC’s enforcement guidelines could provide a useful guide.

If there is one clear takeaway from the ACCC’s Interim Report, however, it is that dark patterns are now firmly in the ACCC’s sights.

Read more: Digital platform services inquiry - September 2021 interim report