A high-profile US lawsuit against e-commerce giant Amazon over so-called “dark patterns” will be familiar to regulators in Australia, who have long held fears local consumers are being shafted.
The Federal Trade Commission (FTC) on Thursday (Australian time) filed a lawsuit against Amazon, claiming it has illegally induced customers to sign up for its Prime loyalty scheme.
The case takes aim at so-called ‘dark patterns’ on Amazon’s website that allegedly trick customers into becoming Prime members and make it too difficult for them to cancel it.
Similar practices have been documented by the Australian Competition and Consumer Commission (ACCC), with a broad probe into digital platforms uncovering dodgy conduct.
But the prospect of a local crackdown is remote unless reforms usher in tougher consumer protections, as ACCC chair Gina Cass-Gottlieb recently said.
So what are “dark patterns” and how are they harming consumers in the US and Australia?
Amazon dark patterns
The FTC’s Amazon lawsuit outlines the allegedly dodgy conduct that falls under the umbrella of “dark patterns”.
This refers to design decisions made by a company – in this case the world’s largest online retailer – that confuse users and make it harder for them to express their shopping preferences.
It can also involve outright manipulation to induce purchases of things like Amazon Prime.
Prime, which has accrued more than 200 million members globally since 2005, charges people a monthly fee for faster shipping, free delivery and its streaming service.
The company made about $9.6 billion from subscriptions in the first quarter of 2023, which is up 16 per cent from the same three-month period in 2022, despite rising inflation.
The FTC alleges many customers have been fooled into signing up for Prime when buying products on Amazon’s marketplace, while those trying to cancel face strange road blocks.
“Amazon tricked and trapped people into recurring subscriptions without their consent, not only frustrating users but also costing them significant money,” FTC chair Lina Khan said.
“These manipulative tactics harm consumers and law-abiding businesses alike.”
In one example, the FTC said customers find it more difficult to access products on Amazon if they aren’t Prime subscribers because the company has designed its user interface to disadvantage them.
In another, the FTC alleged Amazon displayed a purchase button on its website that signed up users for Prime, despite failing to disclose that detail.
And then when customers attempt to cancel Prime, the FTC alleges the company has erected a series of roadblocks, including redirecting users to pages that offered subscription discounts.
“Only after clicking through these pages could consumers finally cancel the service,” the FTC said.
The US lawsuit is a first-of-its-kind case against the e-commerce giant, but the behaviour in question is nothing new.
In fact, local regulators have been warning about the same thing.
ACCC call for reform
“Dark patterns” on platforms like Amazon were rife, Ms Cass-Gottlieb said earlier this year.
Australia’s laws aren’t strong enough to empower the watchdog to crack down on the practices, she said.
“There is a whole set of behaviour that actually takes place … that significantly harms and causes financial loss and frustration for consumers that we’re not able to properly police,” Ms Cass-Gottlieb told Nine Newspapers.
In particular, the ACCC has taken aim at companies making it too difficult to cancel subscriptions to online services – a key feature of the FTC’s case against Amazon.
“While some consumers may switch to an alternative platform or services, there may be switching costs involved that can contribute to consumer lock-in,” the ACCC said, in the latest edition of its digital platforms inquiry reporting.
“Switching can also be limited by factors controlled or influenced by digital platforms. This includes information asymmetries and a lack of transparency that makes it difficult for consumers to compare different products or services, or the use of dark patterns that discourages customers from switching.”
Assistant Minister for Competition Andrew Leigh has said the federal government is considering whether reforms are needed that would better protect consumers from the tactics of digital platforms.
