ADventures in Law

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Junk fees and dark patterns are very much on the FTC’s mind these days, and they are very intertwined. To some degree, the concern over junk fees reflects a concern over a more traditional type of dark pattern – for example, the use of “hidden fees.” But there is another type of dark pattern lurking in the FTC’s proposed <a href="https://www.federalregister.gov/documents/2023/11/09/2023-24234/trade-regulation-rule-on-unfair-or-deceptive-fees">Junk Fee Rule</a> that evokes a much less traditional, and perhaps more controversial, type of dark pattern.

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By way of level setting, recall that the FTC is not a legislature. Legislatures, within reason, can pass laws prohibiting all sorts of things for all sorts of reasons. For the FTC, however, as much as it may dislike a particular practice, it may, by statute, only prohibit those things that are deceptive or unfair (or over which Congress has given it explicit authority, such as warranties). With that in mind, the proposed Junk Fee Rule not only bans hidden fees but also bans so-called aggregated pricing. In other words, a restaurant can’t list the prices for its menu items and in big bold print state that it is adding a 3 percent wellness fee to your check. The proposed rule requires that the 3 percent fee be added to each of the items on the menu – so the $10 hamburger becomes $10.30, perhaps with a disclosure that the price includes a 3 percent wellness fee. Why does the FTC want to ban the use of aggregated pricing? In part, the agency explains, it is concerned about people’s ability to accurately do the math. And in part, citing a study about purchase rates when sales tax is listed separately versus incorporated into the overall price, the agency is concerned that consumers are more likely to purchase something when they see the price broken into parts versus an all-in price. Neither of those conclusions seems particularly controversial, but do they provide a statutory basis for regulation? Clearly, aggregated pricing is not deceptive so long as the additional fee is clearly disclosed. So the question is, is it unfair? Put another way, does aggregated pricing cause substantial consumer injury that consumers cannot reasonably avoid?

Assuming, for the sake of argument, that injury is present because aggregated pricing causes consumers to buy things they otherwise would not, is the injury not reasonably avoidable? Is it unreasonable to expect consumers to be able to figure out 3 percent? And is the injury avoided only if consumers accurately do the math versus estimating? Further, the Junk Fee Rule doesn’t distinguish between percentage fees and dollar fees. Some of us might be math challenged when it comes to percentages, but if a restaurant tells me there is a $5.95 delivery fee, I don’t have to do any math to understand that whatever I order is going to cost me an extra $5.95. So isn’t the injury in at least that instance “reasonably avoidable”? And if it is, then from where does the FTC derive jurisdiction to ban aggregated pricing? Is it the manipulation of consumer behavior that is unfair, i.e., consumers just can’t help themselves so the injury can’t be avoided? And what comes next? Ever notice that a lot of products have a price point like $19.99 or $99.99? That’s not the result of some weird mathematical anomaly but instead reflects a similar belief that consumers are more likely to buy a product that is priced just below a particular threshold. Is that practice unfair?

Which brings us back to dark patterns. As several of us at BakerHostetler have noted in the past, there is a tendency by some who speak about dark patterns to suggest that advertisers shouldn’t be allowed to manipulate consumers. And while manipulation sounds bad, it is in part what good marketers do. So where should the FTC draw the line between lawful and unlawful manipulation? Fortunately, Congress has provided the answer: The practice, however disdainful it may be to some, is acceptable as long as it is not deceptive or unfair.

How Many Junk Fees Does It Take to Create a Dark Pattern?