ABCmouse agreed to pay $10 million and change its marketing and billing practices after the FTC found it misled consumers about cancellations, withheld information and charged memberships without consent.
Age of Learning operates a membership-based online learning tool called ABCmouse Early Learning Academy for children between two and eight years old. ABCmouse failed to clearly disclose to consumers that their subscriptions would renew automatically, leading to additional charges, and made it difficult for them to cancel their memberships. The company also failed to disclose important information related to negative option plans, including the total amount consumers would be charged if they did not act to cancel and the deadlines by which they must cancel to avoid unwanted charges.
Consumers who tried to cancel by calling or emailing ABCmouse or submitting a customer support form were required to navigate a confusing process, often preventing many consumers from completing their cancellations. The company records show that hundreds of thousands of consumers who visited the ABCmouse cancellation path remained subscribed between 2015 and 2018.
The Federal Trade Commission has charged Age of Learning, the company that operates ABCmouse, with deceptive marketing and billing practices that violated several laws, including Section 5(a) of the FTC Act and Section 4 of the Restore Online Shoppers' Confidence Act (ROSCA). The company was accused of using deceptive tactics, including forced continuity, hidden information, and the hard to cancel approach to prevent consumers from canceling their memberships.
ABCmouse agreed to a proposed settlement order with the Federal Trade Commission that includes a $10 million judgment and new marketing and billing practices. The order prohibits the company from making misrepresentations about negative option plans and requires clear disclosure of cancellation procedures, charges, and deadlines. Additionally, ABCmouse must explain key terms and obtain informed consent before enrolling consumers in automatic billing programs, as well as providing simple cancellation mechanisms.
Federal Trade Commission and Age of Learning [ABCmouse and ABCmouse.com]
Related deceptive patterns
The hidden subscription deceptive pattern typically works by employing some form of sneaking or misdirection. Users think they are buying one thing, when in fact there's a hidden legal stipulation that they are in fact signing up to a recurring subscription. Once they have signed up, the service is usually covert and the user is sent no emails or notifications reminding them that they are paying on a recurring basis, so that payments continue for as long as possible. It is also typically paired up with the hard to cancel deceptive pattern.
Hard to cancel (aka "Roach Motel") is a deceptive pattern where it is easy to sign up for a service or subscription, but very difficult to cancel it. This typically involves hiding the cancellation option, requiring users to call customer services to cancel, and making the cancellation process overly complex and time-consuming. This can cause users to give up trying to cancel, and continue paying for the service for a longer period.
Sneaking involves intentionally withholding or obscuring information that is relevant to the user (e.g. additional costs or unwanted consequences), often in order to manipulate them into taking an action they would not otherwise choose.
Prohibits deceptive acts or practices that misrepresent or omit material facts.
Requires companies to obtain consumer's consent before charging their credit or debit cards for goods or services offered through a "negative option feature."
The internet must provide clear and accurate information to consumers, and the use of "data pass" to share billing information with third parties for unwanted memberships undermines consumer confidence.
Prohibits unfair and deceptive Internet sales practices, including misleading representations, failure to disclose material terms, and charging consumers without their express informed consent.
Specifies the enforcement provisions for violations of the Act by the Federal Trade Commission, including penalties and privileges.
Allows State attorneys general to bring a civil action in federal court to obtain injunctive relief for alleged violations of ROSCA, with certain requirements and limitations.