NAD doesn’t often address pricing issues so when it does, I pay close attention. A recent case is especially interesting because it’s also a case about auto-renewals and the Decision refers to those dreaded terms “DARK PATTERNS”.
Here’s what was at issue in this routine monitoring case: Pier 1 Imports offers a rewards program where participants can get a 10% discount on their purchases, as well as other benefits. To participate in the Pier 1 Rewards program, subscribers must pay $9.99 per month. At the time that NAD reviewed the Pier 1 website, the Pier 1 Rewards subscription, along with the $9.99 charge, appeared automatically in a consumer’s cart when they added an item to purchase. The enrollment toggle was pre-checked “on” and had to be toggled to remove the subscription charge. The details about the purchase appeared below the toggle and the full terms for the Pier 1 Rewards program were made available behind a “learn more” hyperlink.
NAD was concerned about two issues: “whether advertising a reduced price for a product is misleading if it reflects a 10 percent discount that is only available with a subscription to Pier 1 Rewards and whether the material terms and conditions of the Pier 1 Rewards subscription are clearly and conspicuously disclosed before the consumer makes a purchase decision.” After summarizing the FTC’s Dark Patterns report, NAD determined that the answer to the first question is yes and to the second, no. NAD did not like the fact that the truly material terms of the reward program – that the charge auto-renews and method for cancellation – were not displayed at the same point where consumers would see the discounted price. Even though, as the advertiser argued, the addition of the rewards subscription was highlighted in large blue font in the cart and next to the Pier 1 Rewards logo, those visual cues were not adequate to justify the display of the discounted price without more information about the subscription program and the automatically renewing charges.
Also, not surprisingly, NAD was concerned about the disclosure of material terms for the subscription behind a generic “Learn More” link, rather than in the cart itself, proximate to the charge and the toggle. Plus, even if a consumer clicked on Learn More, they wouldn’t see the truly material terms unless they read through several lines of text. Accordingly, NAD recommended that Pier 1 “clearly and conspicuously disclose the material terms of Pier 1 Rewards at the time the item is added to a cart.” As to the toggle, although NAD did not explicitly recommend that Pier 1 change it to require consumers to toggle it on to accept the charge, it did cite to both the FTC’s Dark Patterns report and to one of the FTC’s many enforcement actions that stand for the proposition that pre-checked boxes are not affirmative consent.
What are the learnings here?
Don’t shop for the customer: let them choose what they want to buy. In other words, don’t sneak things into a shopping cart. If you want to suggest another add-on purchase, particularly if it will reduce the price of the originally selected item, make the offer compelling, not mandatory. (“You’re $13 away from free shipping!” is good example of that approach. It certainly works for me!)
No one likes surprise fees, especially ongoing ones.
If you’re selling a subscription with an ongoing automatic charge, get the consumer’s affirmative consent: that means telling consumers everything they need to know about the charge and getting their agreement to it.
Don’t hide important terms behind a hyperlink: if it’s a really material term, disclose it clearly and conspicuously. At a minimum, when using hyperlinks for terms, label the hyperlink clearly, not generically, so consumers will know why they should click through.
NAD is pointing to FTC staff reports, guidance, and enforcement actions in its Decisions a lot. If you’re basically an upstanding advertiser, your own practices may never attract the attention of the FTC. But they may well come to the attention of NAD, which seeks to harmonize its own efforts with the agency's.
Case #7092 (Feb 2023)