The Federal Trade Commission (FTC) reached a $100 million settlement with Vonage over allegations that the internet phone service provider violated the FTC and Restore Online Shoppers’ Confidence Act (ROSCA) by adding “junk fees” and using “dark patterns” to make it difficult for consumers to cancel. In addition to the fine that will be used by the FTC to provide refunds to consumers, the proposed settlement order includes a remediation plan, which requires Vonage to: (1) obtain consumers express, informed consent to charge them; (2) simplify the cancellation process, including allowing customers to cancel by the same method they used to sign up for the service; (3) refrain from using so-called dark patterns to frustrate consumers’ cancellation efforts; and (4) be upfront with consumers about subscription plans.

The FTC complaint included allegations that:

  • Since at least 2015, Vonage has failed to provide a simple method for customers to cancel their telephone services, employing a panoply of hurdles, sometimes referred to as dark patterns, which compound to deter and prevent customers from stopping recurring charges.
  • Although Vonage allows consumers to enroll for services at any time through its website, Vonage has required cancelling customers to speak to a live “retention” agent over the phone during limited working hours before processing their request.
  • Vonage has made the requirement to cancel via a live agent difficult for customers to satisfy through obscured contact information, circuitous and redundant procedural requirements, long wait times, dropped or unanswered calls, lengthy and repeated sales pitches, and unexpected high-dollar early termination fees that were not clearly disclosed when the customer signed up for the service.
    • Vonage provides monetary rewards based on agents’ “save rate” — the rate at which agents are able to persuade cancelling customers to change their minds and remain with Vonage. As a result, retention agents are incentivized to do everything in their power to convince the customer not to cancel, including by escalating the cancellation to a supervisor instead of processing it.
    • Many customers cancelling their Vonage accounts wish to keep their phone number and transfer it to a new carrier, a process known as “porting,” but Vonage then requires two separate cancellation procedures. After informing Vonage agents that they wish to cancel their accounts and port out their numbers, these customers are advised that they cannot close their accounts until after the port is complete, at which point they must request cancellation of the account a second time. Failure to do so results in continued billing on these otherwise inactive accounts.
  • Even when customers have managed to navigate Vonage’s process and have reached a live agent and canceled their accounts, in many instances, Vonage has continued to charge them without consent.

The Vonage settlement follows the FTC’s release of their Bringing Dark Patterns to Light report, discussed here, detailing the rise in sophisticated dark patterns that the FTC asserts are designed to trick and trap consumers. The report highlighted multiple enforcement actions under each of four different FTC-identified dark pattern categories and concluded with the stern warning that “[f]irms that nonetheless employ dark patterns, take notice: where these practices violate the FTC Act, ROSCA, the TSR, TILA, CAN-SPAM, COPPA, ECOA, or other statutes and regulations enforced by the FTC, we will continue to take action.”

Troutman Pepper will continue to monitor important developments involving the FTC and its so-called dark patterns enforcement, and we will provide further updates as they become available.