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  • Writer's pictureSwetha Meenal Ananthapadmanaban

Five Dark Patterns costing Australian business NOW!

This article explores five deceptive design practices, commonly known as 'dark patterns,' that contravene Australian legislation and have resulted in substantial financial penalties for businesses. Despite the legal and financial risks, these are often overlooked by businesses, underscoring a critical area of concern for legal professionals and regulators alike.


1. Data-Grab and Nagging

What are these?

These are design features built into websites to solely enable collection of more personal information from consumers. In most cases, the information so obtained is used to profile consumers and target them with intrusive, personalised content or spam consumers with marketing emails.

This includes:

  • consent forms that are already opted-in

  • disclaimers that state “by creating an account you agree to the terms of usage” – which also includes consent to targeting, consent to marketing materials, and third-party advertising

  • nagging pop-ups that collect email IDs with the offer of one-time discounts to consumers or ongoing discounts to members.



Image: Nagging and Data Grab

 

The Australian legal position

The Privacy Act 1988

While passive consent to privacy and marketing communication does not contravene the Australian Privacy Act 1988 (Cth), these are not in line with the best practices recommended under the Australian Privacy Principles.

 

SPAM Act 2003

Using inferred consent to send marketing emails to consumers may contravene section 16 and 17 of the SPAM Act if the business has no ongoing relationship with the consumer. Per the compliance guidelines provided by ACMA, passive consent may suffice for the purpose of sending marketing communications only where the consumer has an ongoing relationship with the business or has a subscription with the business. Even in such cases, any marketing communication must directly relate to the product or the service that the customer has directly subscribed to. Where the communication only related to an adjacent service that the business presumes that the customer might be interested in, it may violate SPAM Act. To avoid being penalised, it is recommended that businesses obtain express consent for marketing communications.

 

In 2023, SPAM Act violations alone costed Australian businesses over 8 million in fines. These fines were levied for a mixture of reasons that include

  • sending marketing messages/emails without consent under the schedule 2 of the SPAM Act

  • sending emails even after the customer unsubscribed using the link in the email

  • for having non-functional unsubscription links

  • for having to go through a multilayered unsubscription process to opt out of marketing communications

 

Enforcement for 2024 for entities that contravene the SPAM Act has already commenced. In January this year, Outdoor Supacentre Pty Ltd paid $302,500 in penalties for sending more than 83,000 marketing text messages in breach of Australian spam laws.

 

Verdict

Not legal. Compliance under the Australian Privacy Act may not guarantee compliance under the SPAM Act. It is best to seek (express or implied) consent for ‘marketing’ purposes separately to avoid potential issues.

 

2. Scarcity Cues

What are these?

These are design features that artificially induce a sense of urgency for consumers in the following ways:

  • Implementing countdown timers to suggest that special pricing is only available for a limited duration or that the opportunity to purchase at a specified price is expiring (commonly seen on travel booking websites).

  • Continuously presenting unverified claims about the purchases of other customers to stimulate interest and provoke consumer action 

  • Promoting the idea of scarcity by claiming that product availability is running low.


Image: Scarcity Cue

 

The Australian legal position

Depending on the nature of the representation, these design features could attract a mixture of s.18 (misleading or deceptive conduct) and s.29 (1)(i) (misleading representations with the nature of price) violations under the Australian Consumer Law.

 

Recently, the ACCC has initiated proceedings against bedroom furniture supplier Emma Sleep GmbH, for using false timers to induce a sense of urgency in its sales campaigns. According to the statement filed by ACCC, the timer reset itself once the initial countdown ended, or the products were offered at a discounted price even after the countdown expired. Given that the timer was coupled with a representation on price, the practice conveniently falls under the ambit of s. 29 (1) (i) of the Australian Consumer Law, which prohibits businesses from 'making false or misleading representations with respect to the price of goods or services'.

 

Scarcity cues with respect to the representation of limited availability of goods and services could be trickier to enforce. These representations might be ‘reasonably necessary’ to protect the legitimate interests of the businesses. Businesses may hold a legitimate interest in informing consumers about the availability of stock, and this information might allow consumers to plan effectively. However, when found to be deceptive or misleading, this could contravene s. 18 of the ACL - which prohibits businesses from engaging in 'conduct that is misleading or deceptive or is likely to mislead or deceive'.

 

Verdict

Illegal or extremely risky depending on the nature of the pattern. Given the enforcement pattern in other jurisdictions, the Federal Court is likely to hold that the representations contravene ACL. Given Emma's market position, the penalties will be commensurate with the profits earned via use of dark patterns. (see, s. 224 ACL )


3. Hidden Costs

What are these?

These design features tend to hide important information relating to cost or price of a transaction, or tend to put them off until the conclusion of a commercial transaction. As a result, consumers are forced to pay more for a product or service than they may have initially perceived. This could be in the form of an additional tax, booking fee, surcharge or other expenses that are revealed to consumers at the very end of their purchase. Given the time spent in finalising a purchase, consumers are more likely to proceed with the transaction than restart this process on another business's website (which may or may not contain hidden costs in the transaction process).


While transactions offer an opportunity for consumers to opt out of additional costs (e.g., insurance), one must diligently opt-out of these additional charges. These patterns could exploit a time-poor consumer and trick them into making decisions that do not necessarily benefit them. Hence, these might be considered as a 'hidden cost' as well.

 


Image: Hidden Costs and scarcity cues

 

The Australian legal position

Hidden Cost dark patterns contravene section 29 1 (i) of the ACL for making ‘false or misleading representation with respect to the price of goods or services’.

 

 

  • In December 2023, the Federal Court ordered Airbnb Ireland UC to pay $15 million in penalties for misleading Australian consumers about currency on its platform, exemplifying the 'hidden cost' dark pattern. Between January 2018 and August 2021, Airbnb displayed prices for Australian customers with a dollar sign, without an indication of whether the prices where in Australian or US dollars. This lack of currency clarity led consumers to pay more than expected due to the USD/AUD exchange rate and additional bank charges for foreign transactions. Airbnb admitted this conduct likely contravened Australian Consumer Law. The entity has agreed to offer up to $15 million in compensation to about 63,000 affected customers, reimbursing the difference between expected AUD payments and actual USD charges, plus any extra foreign currency fees. The average compensation is estimated at $230 per consumer. Airbnb has since amended its platform for clearer currency indication and is also required to establish an Australian Consumer Law compliance program.

 

  • In September 2023, the ACCC initiated proceedings against dating site eHarmony for use of Roach Motel and Hidden Cost dark patterns on its UI. eHarmony is accused of failing to display the accurate minimum and total prices of memberships. The advertised monthly prices did not disclose the mandatory additional fee that customers had to pay for their memberships every month. Customers who purchased a monthly subscription had to pay AUD $3 more per month than the advertised price. The minimum total subscription cost was only revealed late in the purchase process, and in small font, breaching the transparency expected in digital service agreements.

 

As demonstrated in these cases, consumers are misled into believing that they are paying a lesser price than that revealed to them towards the very end of the transaction. This contravenes s. 29 (1)(i) ACL that prohibits businesses from making a false or misleading representation with respect to the price of goods or services.

 

Verdict

NOT legal. Businesses must redesign their UI to ensure that all information relevant to a commercial transaction are declared upfront, leaving no surprises for a consumer at the conclusion of the transaction/purchase/sale.

 

4. Sneak into basket

What is this?

This is when the UI is designed such that the user is made to believe something is being added to their cart for ‘free’, but the business automatically deducts payments on a monthly basis after a period of 14-28 days. In most cases, the user is entirely unaware of the transaction, or the additional service included in their cart, until the first payment is deducted. Important disclosures about the terms are made in extremely small font compared to the dominant claims, resulting in manipulation of what the consumer comprehends.

 


Image: Hidden Costs

 

How is this different from Hidden Costs?

In the case of hidden costs, consumers are billed a one-time fee immediately at the conclusion of a purchase. There are no recurring costs incurred. But in the case of a ‘sneak into basket’ violation, the consumer is unaware of the transaction altogether, until the first billing occurs a fortnight or a month later.

 

The Australian legal position

Given that ‘sneak into basket’ involves a representation that the product is offered for free without being clear about the terms that may apply to this ‘free’ offering later, this falls within the ambit of s. 32 of the ACL, that prohibits businesses from offering ‘any rebate, gift, prize or other free item with the intention of not providing it’ in accordance with the offer.

 

In January this year, Dreamscape Networks International paid $56,340 in penalties following infringement notices by the ACCC for using the sneak into basket dark pattern. The company, between October 2019 to July 2023, had falsely advertised a '3-month website builder' and an 'additional domain name registration' as free, automatically adding them to customers' carts. These products, labelled as 'free gifts', had hidden auto-renewal terms leading to charges post the free period, misleading consumers about the actual costs. The company has since updated its disclosure around auto-renewal and the cost of its products.

 

Verdict

Not legal. Businesses must redesign their UI to ensure that all information relevant to a commercial transaction are declared upfront, leaving no surprises for a consumer after the conclusion of the transaction/purchase/sale.

 


5. Roach Motel or Hotel California

What is this?

Roach Motel or Hotel California dark patterns involve a combination of design and UI-features that make it easier for a consumer to subscribe to a service and harder to cancel. This approach results in a subscription experience that is quick and effortless, often taking mere seconds. The unsubscription process, however, is intentionally designed to be tedious and convoluted. Customers are required to navigate through numerous steps, respond to a series of questions, and sometimes face additional obstacles, which could undermine their autonomy, and dissuade them from successfully terminating their subscription.

 

Image: Roach Motel

 

The Australian legal position

There appears to be a distinct dichotomy in the enforcement strategies employed against this pattern – with some jurisdictions prosecuting patterns hidden in the process leading up to subscription, and some focusing on the convoluted unsubscription process. The ACCC’s efforts have focused on the former.

 

In September 2023, ACCC initiated proceedings against dating site eHarmony for use of Roach Motel in the process leading to subscription. It appears that eHarmony had represented that their premium membership subscriptions were for fixed terms (6, 12, or 24 months), without clearly disclosing that these subscriptions would automatically renew, often at higher rates. The advertised monthly prices did not disclose the mandatory additional fee that customers had to pay for their memberships every month. Customers who purchased a monthly subscription had to pay AUD $3 more per month than the advertised price.

 

The disclosure of the renewal period, and the renewal price (which in this case was higher than the initially represented period) appeared in small font at a later period in the purchase process. This crucial information was often hidden in fine print, leading to unexpected charges for consumers.


Since this involves a combination of misleading representations on price, automatic renewal of the memberships, and any additional fee that would apply if consumers opted for a monthly plan – ACCC’s statement seeks to bring a claim under s. 18 of ACL, s. 29 (1) (i) for misrepresentations on price, and s. 34 for misleading representations about the characteristics of the membership.

 

Verdict

Extremely risky. Businesses must consider redesigning their UI to ensure that all terms of purchase and subscription are clear.

 

Musings

The case of eHarmony offers a compelling study of the intricacies of consumer law. Could the representations involved in the process of subscribing construed as a 'sneak into basket' or a 'hidden cost' dark pattern? This situation involves misleading information about costs and recurring payments that consumers didn't clearly agree to, leading to unexpected charges both at the end of and after the purchase process. Given these elements, it seems we could consider eHarmony's approach a combination of both types of dark patterns.

 

However, given that these elements are incorporated as part of a subscription that consumers actively engage with, it invokes s.34 of the ACL in addition to s. 29 and s. 32 that prohibit 'hidden costs' and 'sneak into basket' dark patterns. S. 34 prohibits conduct that could mislead consumers about the nature, characteristics, suitability, or quantity of any services - making illegal the use of such dark patterns in the process of subscription. This relevance to section 34 further escalates the penalty that an entity would have to pay under s.224 of the ACL – which could be up to 50 million, or three times the value of the benefit obtained using the dark pattern, or 30% of the adjusted turnover of the business during the breach period.

 

In all, while the introduction of a prohibition on unfair trading practices will further strengthen the ACL and add a certain degree of certainty as to how these design practices will be regulated, the ACL in its current form is wide enough to bring most dark patterns under its ambit. Businesses must start thinking about the legality of their UI to avoid being penalised under the ACL.

 

Wait, there’s more!

The EU's Digital Services Act was enforced on 17 February 2024.

For Australian businesses that offer services within the EU, the DSA, in Article 25, prohibits the use of Dark Patterns on the user interface - failure to comply could attract up to 6% of global turnover as penalties. If your business has a substantial connection to the EU, i.e., targets EU markets through local languages, currency, marketing, domain names, app availability, or tailored customer service - then you fall under the ambit of the DSA.


Get in touch with us for assistance with compliance!


Resources

  1. Duped by Design Consumer Policy Research Centre, Duped by Design (2022) <https://cprc.org.au/dupedbydesign/>.

  2. Harry Brignull, Deceptive Patterns (Testimonium Limited, 2023).


 


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