Companies offering sweepstakes should consider auditing promotions practices to be certain that required disclosures are not "undone" by "dark patterns," especially after the Federal Trade Commission's ("FTC") $18.5 million settlement regarding Publisher's Clearing House's (PCH) use of dark patterns in its online sweepstakes. The FTC alleged that PCH used "dark patterns" to mislead consumers making them believe that a purchase is necessary to win or would increase their chances of winning, and that their sweepstakes entries are incomplete even when they are not. 

Background 

The FTC filed its proposed order setting out its settlement terms with PCH for a permanent injunction, monetary judgment, and other relief on 27 June 2023. According to the complaint, PCH violated Section 5 of the FTC Act by tricking consumers into believing that purchasing merchandise from its website was necessary to enter the sweepstakes or to increase their chances of winning. PCH has agreed to pay USD 18.5 million to consumers, to make substantial changes to how it conducts its business online regarding entering, and to disclose material additional costs regarding its sweepstakes. According to the FTC, PCH's unfair and deceptive practices included an entry process with confusing steps and additional emails causing consumers to believe that their entries were incomplete and that additional steps were required before they would be eligible to win or to prevent disqualification. In these emails, PCH directed consumers back to PCH's e-commerce site where once again consumers had to navigate through deceptive prompts. If consumers got to the “Official Order-Entry Form” page without putting anything in their shopping cart, PCH often displayed a message directing them back to the shopping pages. In other cases, if consumers clicked the “Enter Now” button, the FTC says the company presented them with more confusing product offers. Throughout the process, if consumers still tried to enter the sweepstakes without buying anything, PCH continued to send them confusing emails referring to “1 critical decision” or “the last step” that consumers needed to take. When consumers would click on those emails, the company made references to the fact that “We see you’ve never placed an order” and that “Just one order is all it takes to activate these customer rewards". One screen with the bold headline “PLEASE DON’T SAY NO!” presented people with an array of merchandise to buy. According to the FTC complaint, these persistent messages deceived consumers into believing that they were required to purchase something to enter a sweepstakes or to improve their odds of winning.

The common thread in PCH's actions is that PCH used illegal dark patterns to fuel digital deception and harm targeted consumers, often low-income and older individuals. 

As any company offering a sweepstakes should be aware, a purchase cannot be required for entry in a sweepstakes and "NO PURCHASE NECESSARY" should be clearly and conspicuously disclosed. The complaint acknowledges that PCH's website included the disclosure. However, this disclosure only appeared in fine print and was therefore not effective particularly given the confusing entry process and messages that undermined the disclosure. 

In Depth

According to the FTC, the settlement aims to "send a clear message that manipulative design techniques are a no go under [U.S.] laws." The FTC proposed order requires PCH make key changes to its email and internet operations including:

• Stop deceiving consumers about purchases and sweepstakes: PCH would be prohibited from implying that a purchase is required to enter a sweepstakes or that a purchase will increase the chances of winning. Notably, PCH was already prohibited from making such representations pursuant to a 2001 consent order settling claims brought against PCH by 26 state attorneys general.
• Separate sweepstakes from sales: PCH would be required to clearly distinguish on its entry and order forms information related to entering and ordering.
• Make clear disclosures: PCH would be required to make clear, conspicuous, and unavoidable disclosures on every shopping page that a purchase is not required to enter a sweepstakes and that purchasing will not help a consumer win, and include a link that will take consumers directly to a page where they can enter the sweepstakes without any sales messaging. And in many cases, the company would be required to obtain a consumer’s express acknowledgement using a checkbox or similar means that ordering will not help them win and will not improve their chances of winning.
• Preserve records: To help prevent further use of dark patterns, the order requires PCH to preserve records of any market, behavioral, or psychological research, or user, customer, or usability testing, including any A/B or multivariate testing, copy testing, surveys, focus groups, interviews, clickstream analysis, eye or mouse tracking studies, or analyses regarding consumers’ impressions of any ads, marketing, or promotions of sweepstakes or products.

Commentary 

The FTC's proposed order against PCH comes amid the FTC's broader crackdown against online dark pattern conduct. Recently, the FTC has focused on targeting digital dark patterns as commerce has moved online where companies are able to layer a host of sophisticated tricks more frequently and at a much larger scale than traditional in-person retailers.

What's Next

This proposed order is only the start of the FTC cracking down on dark patterns across industries. Therefore, companies should review their sweepstakes practices to: (1) ensure they are as transparent as possible and (2) the proper disclosures are made and not undermined by other actions or processes. Companies should subject their ecommerce platforms to rigorous scrutiny and as necessary engage the help of specialist counsel, as this settlement—along with other recent developments—demonstrate that the FTC is aggressively targeting dark pattern behavior.