On September 16, Venable’s Advertising and Marketing Group hosted its 9th Annual Advertising Law Symposium in Washington, DC. After a two-year hiatus due to the coronavirus pandemic, attendees were energized to convene in person once again at the firm’s DC headquarters to discuss the latest trends, challenges, and developments impacting the industry.
The event drew professionals from the legal and business worlds, including in-house counsel and clients from some of the world’s biggest brands. Speakers covered a broad range of topics, but among the most widely talked about were matters related to dark patters, recurring payments, false advertising, and the metaverse.
Dark Patterns
The term “dark patterns” was everywhere at the symposium, and—according to panelists—it’s also a big focus at the Federal Trade Commission (FTC).
The term “dark patterns,” which are also called “deceptive design patterns,” was coined by Harry Brignull, a UX specialist, in 2010. The term refers to marketing methods that supposedly obscure or subvert consumer decision-making or choice through user experience design. These misleading marketing tactics include trick questions, inertia selling, intentional misdirection, difficult-to-cancel subscriptions, hidden costs, complicated navigation menus, deceptive reviews and endorsements, and product ranking websites that mislead and harm consumers.
Although the FTC has monitored these practices for some time, newly appointed leadership has increased its attention to dark patterns and ramped up enforcement actions to protect consumers.
The FTC isn’t the only regulatory body increasing scrutiny of dark patterns. The Consumer Financial Protection Bureau (CFPB) and state attorneys general have also been ramping up enforcement actions. Digital marketers can help mitigate legal risks by:
- Considering the context and the results
- Including mandatory fees upfront
- Collecting only necessary data
- Presenting disclosures in a clear and conspicuous manner
Subscriptions, Autorenewals, and Payment Processing
Many of the recent cases brought to class action by regulatory bodies have concerned recurring payments, including subscriptions, automatic renewals, and memberships. The FTC is keeping a particularly watchful eye on subscription services. Current litigation trends show that the FTC is expanding its enforcement of the Restore Online Shoppers’ Confidence Act (ROSCA), particularly as it relates to difficult-to-cancel subscriptions and online transactions. The US v. MyLife case is an example referenced by various speakers throughout the symposium.
In the MyLife case, the U.S. Department of Justice (DOJ) alleged that the company’s cancellation mechanism violated ROSCA because it was not “simple.” The only cancellation method MyLife provided was by telephone, and when consumers did reach an agent, they were faced with a six-part retention sales script with the goal of convincing customers not to cancel. The agents were also instructed to inform customers seeking a refund that the subscriptions were nonrefundable under MyLife’s terms and conditions.
MyLife ultimately settled for $21 million and is permanently banned from offering any product with a negative option feature, but the case gives insight into the FTC’s position on “save attempts.” Save attempts are scripted lines that operators are required to use throughout a call to prevent a customer from leaving a service or subscription.
The MyLife case showed that the FTC deems a six-part save attempt template as unnecessarily excessive and harmful to consumers. To avoid legal risks, any merchant offering subscription services or recurring payment options must make clear and conspicuous disclosures, get informed consent, send order confirmations, and provide a simple way for consumers to cancel.
False Advertising
Another case referenced across multiple sessions was the recent Dwyer v. Allbirds class action, in which plaintiffs attacked allegedly false statements regarding the environmental impact of Allbirds’ wool shoes and the welfare of their sheep.
For consumers, it is more important than ever to understand how the product they are buying affects the environment. Companies have responded with “green” marketing campaigns, but sometimes there’s a gap between what companies believe their green claims mean and what consumers understand. Venable attorneys suggested companies choose their words wisely, particularly in the advertising and marketing sphere. They encouraged companies to be careful about making claims in advertisements unless they have the data to back up those claims, and if they don’t have data, make sure the claims are not measurable or capable of proof (and require substantiation).
Allbirds was ultimately able to defend against the plaintiff’s deceptive marketing claim because it had the calculations and data to back up its own claims, and it provided the analysis and calculations on its website for consumers to review and evaluate.
The FTC’s “Green Guides” provide guidance on claims such as “sustainable,” “recyclable,” “renewable,” and “nontoxic.” Marketers should familiarize themselves with the latest updates to the Green Guides, which, along with the court’s decision in Allbirds, serve as helpful guideposts to the type of data companies should collect and provide. Offering this information to consumers can help marketers avoid claims of false advertising, “greenwashing,” and deceptive or misleading marketing … but what is deceptive or misleading in the metaverse?
Influencer Marketing and the Metaverse
Let’s face it: influencer marketing is here to stay—and grow. Brands are exploring NFTs, cryptocurrencies, and other virtual partnerships, including those with CGI influencers in the metaverse. Think about it: virtual avatars cost less, are controllable, can be in multiple places at once, and are basically the ideal spokespeople.
The FTC is proposing updates to its endorsement guides that expand the definition of “endorser” to include computer-generated influencers (i.e., not real people)—but what do disclosures look like? Companies like Roblox have been accused of deceptive marketing because of undisclosed avatar influencers within the Roblox metaverse and undisclosed sponsored content within organic worlds. Influencers and sponsors can avoid common pitfalls by always disclosing payments, gifts, and material connections.
Influencer marketing will continue to be a theme back on planet Earth as well. The National Advertising Division (NAD) is an agency that monitors national advertising in media. Its decisions represent the largest body of advertising decisions in the United States—more than those made by the FTC. When using influencer marketing on platforms like Instagram and TikTok, advertisers might benefit from conducting self-regulation to ensure they are providing educational material and guidelines to influencers, and influencers are properly following them.
Learn more about the 9th Annual Ad Law Symposium , visit the All About Advertising Law blog to hear more from our group, and sign up to be among the first to know about upcoming events hosted by our Advertising and Marketing Group.