Privacy
Data Privacy Alert: FTC Proposes $100 Million Action Against Vonage
December 9, 2022
The FTC is taking a much more aggressive approach toward enforcing privacy regulations of all sorts, including obtaining and managing consumer consent. Its November proposed court order against Vonage, an internet phone service provider, takes aim at deceptive dark patterns, negative-option consent, and undisclosed fees.
Overview
On November 3, 2022, the Federal Trade Commission released its proposed court order against Vonage, a Voice-over-Internet-Protocol (VoIP) phone service, to stop the company from imposing junk fees and creating obstacles to consumers and businesses who wish to cancel their service. The order alleges that Vonage:
- Employed dark patterns to make it difficult for users to cancel their service
- Limited the means to cancel service and imposed additional barriers to access agents capable of cancelling services
- Imposed undisclosed fees on users who cancelled
- Continued to charge users who had cancelled their services
At its core, the court order states that Vonage makes it easy for customers, whether consumers charged $5 - $50 a month or businesses paying up to thousands of dollars a month, to sign up for services, but difficult to cancel. Users can enroll via phone, online, or other means, but the only option to cancel since 2017 has been speaking to a live “retention agent” on the phone.
Vonage makes cancellation more difficult by making it difficult to find the correct phone number for cancellation agents, failing to transfer subscribers to the number from customer service lines, limiting hours of operation, and failing to call back consumers even after promising to do so.
Vonage has agreed to the proposed court order, which passed by a 4-0 vote of the commissioners. The order must be approved by the District Court Judge of New Jersey before it goes into effect.
What It Covers
The court order requires Vonage to change its practices as well as pay a substantial fee. They include:
- Stopping unauthorized charges
- Requiring consumers’ express, informed consent for charges
- Simplifying the cancellation process
- Stopping the use of dark patterns to frustrate consumers
- Explaining negative option subscriptions clearly, spelling out actions consumers must take to avoid charges
- Paying $100 million for refunds to be issued by the FTC to consumers
Expert Analysis from Jeffrey M. Dennis, Shareholder, Buchalter
The FTC’s recent order against Vonage re-emphasizes the FTC’s stance on the use of dark patterns - namely that companies will be punished for imposing constraints on consumer choice, specifically when it comes to cancellation of specific services. Companies should carefully review the FTC position, which is a clear warning that the FTC will be closely scrutinizing businesses that make it difficult for consumers to make a choice through the use of dark patterns.
In addition to the FTC, state privacy laws also demonstrate a prohibition of the use of dark patterns. Both the California privacy law (the California Privacy Rights Act) and the Colorado privacy law (the Colorado Privacy Act) outlaw the use of dark patterns to obtain consumer consent related to the collection and use of consumer personal information. Coupled with the recent line of FTC rulings in this area, it is evident that companies who utilize dark patterns do so at their own risk.
Data Privacy Tip
Organizations must recognize that cookie banners and older forms of acquiring and managing consumer consent will no longer suffice; they must deploy enterprise consent management solutions. Find out what it takes to make sure you’re compliant in our recent infographic.
