FTC Targets Publishers Clearing House ​“Dark Patterns” in Sweeping Order

Yesterday, the FTC announced an $18.5 million settlement with Publishers Clearing House (PCH), a marketing company known for using sweepstakes to sell magazine subscriptions. In its 52-page complaint, the FTC alleges PCH used purported ​“dark patterns” to promote product purchases, failed to disclose total costs, misrepresented its privacy practices, and used misleading email headers in violation of Section 5 and the CAN-SPAM Act. The order prohibits the company from making specific misrepresentations regarding sweepstakes entries, includes mandatory disclosure requirements, and requires consumer data deletion, among other provisions.

The case represents the FTC’s second ​“dark patterns” action in the past week (see also the FTC’s complaint against Amazon), signaling that this issue remains at the forefront of the FTC’s enforcement agenda. (See here and here for more context and analysis on ​“dark patterns.”)

The Complaint

According to the FTC, PCH engaged in deceptive ​“dark patterns” such as:

• Multiple entry forms and ​“call-to-action” buttons that told consumers they were registering for sweepstakes but in reality directed consumers to e-commerce sites, where they were encouraged to purchase products. Consumers had to click on an additional ​“call-to-action” button to complete sweepstakes entry, which didn’t appear until consumers finished scrolling through the e-commerce site.
• Subsequent emails telling consumers they must complete another ​“final step” in order to be eligible to win prizes, when in fact no such ​“final step” was necessary. Clicking on the link to complete the ​“final step” led consumers to more e-commerce sites and other ​“call-to action” buttons to enter the sweepstakes.
• Use of language and website design elements to conflate the sweepstakes entry process with the product ordering process. For example, naming the sweepstakes entry form the ​“Official Order-Entry Form” or classifying consumers as ​“Preferred Customers” or ​“Presidential Preferred Customers” if they placed product orders. According to the FTC, this led consumers to believe they could increase their chances of winning prizes if they bought products from PCH, which is prohibited by state laws.
• Website notifications and design elements that hindered consumers from completing sweepstakes enrollment if they hadn’t purchased any products.
• Order summary pages and emails that didn’t include total costs, including shipping and handling charges or applicable taxes, or that included the costs in a way designed to obscure them from view. The FTC noted that shipping and handling costs were typically around 41% of product costs and could be as high or higher than 100% of product costs, and that PCH executives were well aware that many customers experienced shipping and handling ​“sticker shock.”
• Disclosures – such as the disclosure that ​“no purchase is necessary” that companies are required to make when promoting sweepstakes – made in light-colored typeface and included ​“below the frame” of the webpage, meaning consumers had to scroll down all the way to the bottom (and past the prominent ​“Continue” button) to see them.

In addition, the FTC said that PCH’s use of email subject headings featuring references to a ​“W” followed by a hyphen and a number led consumers to believe they were in reference to IRS W-2 forms, thus creating a false sense of urgency and importance. Some examples of headings used by PCH include ​“High Priority Doc. W-2 Issued” and ​“CONFIRMED & BINDING Contents Re. Doc W11.” The FTC alleged these headings violated the CAN-SPAM Act’s prohibition against email subject headings that are likely to mislead consumers about a material fact regarding the contents of the email.

The FTC also noted that until January 2019, PCH claimed it did not ​“rent, license, or sell” consumers’ information to third parties in its privacy policy, while in other sections, it stated that it did share such information, including with marketing cooperatives, advertisers, and publishing companies.

The Order

The FTC’s settlement requires the company to pay $18.5 million, overhaul its user interface, and stop surprise fees. PCH will also be required to delete consumer data collected before January 2019.

While the misrepresentation prohibitions and data deletion requirements aren’t particularly surprising, it is noteworthy that the Orders spends nearly 13 pages laying out detailed, prescriptive disclosure and website design requirements that the company must adopt going forward. For example, on any pages offering both sweepstakes entry and product purchases, PCH must ​“visually delineate” between the two sections ​“by using two parallel lines that extend across the webpage.” The company must also use specific, order-mandated disclosure language in various circumstances; the appearance and location of the disclosures are also specifically prescribed by the Order. When displaying products selected by consumers, PCH must provide an ​“editable list of the Products selected” and following product purchases, PCH must provide a detailed follow-up email containing at least six prescribed categories of information.

In the past, the FTC has generally avoided prescriptive disclosure requirements, relying instead on more general ​“clear and conspicuous” order definitions. In this order, however, the agency doesn’t seem to be leaving anything to chance.

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A few observations on the settlement. First, ​“dark patterns” aren’t disappearing into the sunset anytime soon. Companies should make sure website design elements and order checkout experiences don’t take customers on needless loops or obscure material information in the interest of selling (or upselling) products or services. Second, it’s important to remember that sweepstakes laws make it unlawful to require consumers to make a purchase in order to enter. It’s not enough to simply provide an alternate method of entry – companies must ensure that the free option is clearly disclosed and that they don’t otherwise suggest that a purchase is necessary or that it will improve odds of winning. Third, the FTC is much more prescriptive in this order that what we typically see. It’s hard to know whether that’s the start of the new trend related to ​“dark patterns” allegations, or whether this was driven by the company’s history (which includes multimillion dollar settlements with State AGs in 1994, 2000, 2001, and 2010, as well as a $10 million settlement in a class-action lawsuit). In any event, companies would do well to review and fix practices on their own before the agency comes a-calling.