National Advertising Division Recommends that Pier 1 Provide Enhanced Clear and Conspicuous Automatic Renewal Program Disclosures
As part of the independent, non-profit BBB National Programs, the National Advertising Division independently evaluates and regulates the truth and accuracy of national advertising. It also works to increase the public’s confidence in advertising. The NAD also offers dispute resolution process for advertisers.
Recently, the NAD reviewed Pier 1’s automatic renewal subscription rewards loyalty program that charges consumers a recurring monthly or annual fee for products discounts, and free shipping and returns on select items. In doing so, the NAD recommended that the company provide enhanced “clear and conspicuous” disclosures.
As described by the NAD, items added to a consumer’s cart on the company website automatically include the rewards subscription via a pre-checked box. Additionally, the terms of the renewal subscription program appeared under the pre-checked box. According to the NAD, consumers are required to take affirmative action to uncheck the box to opt-out of the automatically renewing subscription and cost related thereto.
According to the NAD, one issue was whether promoting a lower price for a product or service is deceptive if that price is only made available to those that agree to the automatically renewing subscription. The other issue was whether the material terms of the automatic renewal subscription program were “clearly and conspicuously” disclosed prior to a consumer’s decision to make a purchase.
The NAD ultimately concluded that, unless the terms of the automatically renewing subscription are appropriately disclosed, it is misleading to promote a discounted price if the discount is only available when a consumer consents to a subscription. In doing so, the NAD also found that the automatic renewal subscription terms and cancellation mechanism were not clearly and conspicuously disclosed at the time consumers viewed the discounted price. The NAD criticized the company’s use of a “Learn more” hyperlink that required consumers to click upon in order to be informed of the material terms and conditions of the renewal subscription program.
The NAD also addressed whether a pre-checked box was sufficient to establish assent. While the NAD did not reach the point of stating that it was not … it is safe to assume that it is not. Pre-checked boxes are strongly disfavored by consumer protection regulatory agencies and are typically not construed as being tantamount to affirmative consent.
Importantly, the NAD cited the Federal Trade Commission’s 2022 “Bringing Dark Patterns to Light Staff Report that specifically addresses user interface design practices that manipulate users into making choices they would not otherwise have made and that may cause harm, as well as the FTC’s .com Disclosure Guidelines.
The NAD recommended that Pier 1 provide enhanced, “clear and conspicuous” automatic renewal program disclosures of the material terms and conditions concurrently with the rewards subscription being added to a consumer’s shopping cart.
The Federal Trade Commission and state attorneys general have been aggressively policing user interfaces that obscure, subvert and/or impair impairing consumer autonomy and decision-making.
The FTC’s Restore Online Shoppers’ Confidence Act, in part, requires online marketers to clearly and conspicuously disclose all material terms of the deal before obtaining a consumer’s billing information; obtain a consumer’s express informed consent before making the charge; and provide a simple mechanism for stopping recurring charges.
By now, digital advertising should be well-aware of these requirements, as well as the harsh civil penalties that come with violation of the rule. The FTC is permitted to seek a variety of remedies for violations of ROSCA, including civil penalties, injunctive relief and consumer redress.
Several state laws also govern automatically renewing subscriptions and, in some cases, are more stringent that ROSCA. Consult with an experienced FTC compliance and defense attorney to learn more about how to comply with applicable legal regulations.
Takeaway: Here, the NAD evaluated whether the advertising is misleading, and the advertiser clearly and conspicuously discloses the material terms and conditions of the advertised program or offer within the four corners of the advertising in which that claim appears to ensure a company has not attracted business through a misleading initial approach. Automatically adding items to the shopping cart without a consumer’s permission or deceiving a consumer into unknowingly purchasing products or services by using a pre-checked box is a recipe for an investigation, enforcement and/or private litigation involving the FTC, state attorneys general, the California Auto Renewal Task Force and/or class action plaintiffs. Overall, when designing user interfaces, businesses should look not just at the effect their design choices have on sales, click-through rates, or other profit-based metrics, but also on how those choices affect consumers’ understanding of the material terms of the transaction. And, if an advertiser becomes aware that a particular design choice manipulates consumer behavior by inducing false beliefs, the company should remediate the problem.
Richard B. Newman is an FTC advertising practices attorney at Hinch Newman LLP. Follow FTC defense attorney on Twitter.
Informational purposes only. Not legal advice. May be considered attorney advertising.
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Hinch Newman LLP’s advertising and marketing practice includes successfully resolving some of the highest-profile Federal Trade Commission (FTC) and state attorneys general digital advertising and telemarketing investigations and enforcement actions. The firm possesses superior knowledge and deep legal experience in the areas of advertising, marketing, lead generation, promotions, e-commerce, privacy and intellectual property law. Through these advertising and marketing law updates, Hinch Newman provides commentary, news and analysis on issues and trends concerning developments of interest to digital marketers, including FTC and state attorneys general advertising compliance, civil investigative demands (CIDs), and administrative/judicial process. This blog is sponsored by Hinch Newman LLP.