Businesses that offer subscription-based services to their customers, online or via an app, need to ensure that subscriptions are easy for users to cancel. Understanding how website and app design or online choice architecture (OCA) impacts a consumer’s ability to navigate any cancellation options is becoming increasingly relevant. The US Federal Trade Commission (FTC) and Department of Justice (DoJ) have recently sued Adobe Inc, the creative and design software company behind Photoshop, alleging that it hid expensive cancellation fees from its users and made it difficult for them to cancel their subscriptions.

The Adobe case

The lawsuit charges Adobe with harming consumers by enrolling them by default in its most lucrative subscription plan and failing to clearly disclose that they were agreeing to a year-long commitment and a hefty early termination fee of hundreds of US dollars.

The lawsuit says Adobe clearly discloses the termination fee only when subscribers attempt to cancel, thereby using the threat of the fee to trap consumers in subscriptions they no longer want. It also alleges that the terms and conditions detailing the fee are hidden in fine print and behind optional textboxes and hyperlinks, some of which consumers have to ‘hover’ over to be able to see. Finally, the DoJ says that the process of cancelling an Adobe subscription is onerous and complicated, with customers having to click through numerous web pages, re-enter their password, provide mandatory feedback on why they were cancelling, and navigate several pop-ups and offers designed to entice them to stay, along with the early termination fee being presented to them in red font.

The effect of this, the DoJ says, is to deter customers from cancelling their subscriptions and therefore cause them harm.

What is OCA?

OCA is the design of online environments in a way that will affect users’ decision-making and actions. OCA often makes our lives easier – for example by making online services smoother and more intuitive, or by picking out relevant products for us. However, it can also cause harm if designed in a way that weakens competition or doesn’t benefit consumers. These instances of ‘deceptive design’ or ‘dark patterns’ are often purposefully designed to trick consumers into doing things they don’t want to do.
Examples include a consumer buying or signing up for something they didn’t mean to, not cancelling a subscription even if they set out to cancel it or feeling pressured into doing something due to fake urgency, such as fake time limitation (“You only have five minutes to complete your transaction!”) or fake scarcity (“Only two items left in stock!”).

Many examples can be found on the ‘Deceptive Patterns: Hall of Shame’ website, which showcases problematic OCA used by companies around the world.

OCA a hot topic overseas

Along with the FTC and DoJ’s recent action against Adobe, competition and consumer protection regulators around the world are taking a strong interest in OCA. Hundreds of cases have been brought against companies which utilise deceptive design techniques to trick consumers, and many of these relate to cancellation of subscriptions. The FTC has also taken action against Amazon for making it difficult to cancel its ‘Amazon Prime’ subscription, and the New York Times was held liable for failing to disclose automatic subscription renewal terms, leading to unauthorised charges and hidden subscription renewals.

The UK’s Competition and Markets Authority is currently investigating two memory foam mattress companies (Emma Sleep and Simba Sleep) for misleading OCA practices: both companies allegedly used countdown timers and ‘act fast’ messages to create a false sense of urgency and pressure consumers into a sale.

OCA of increasing interest in New Zealand

In New Zealand, the Commerce Commission is also taking an interest in OCA practices. The Commission received judgment against online ticket reseller Viagogo in March 2024, successfully arguing that Viagogo had breached the Fair Trading Act by misleading consumers about the demand for its tickets and events, and therefore the urgency with which consumers needed to act. The Commission is also currently investigating retail company Dick Smith for allegedly trapping customers in memberships they didn’t want by automatically ticking a checkbox while they completed their order.

New Zealand businesses that offer subscriptions online (or via an app) should be aware that OCA is an increasing area of focus for regulators. Businesses must ensure that their subscription terms and conditions are clearly presented to consumers and that subscriptions are easy to cancel.

If you receive a complaint or have any questions about online subscriptions or OCA more broadly, feel free to contact the Consumer Markets Team at Wynn Williams.