The Federal Trade Commission recently announced that it has stopped internet phone service provider Vonage from allegedly imposing junk fees and creating obstacles to those that try to cancel their service.

According to the FTC, the company used dark patterns to make it difficult for consumers to cancel and often continued to illegally charge them even after they spoke to an agent directly and requested cancellation. The FTC alleged that the company violated the Restore Online Shoppers’ Confidence Act (“ROSCA”).

Under the proposed court order, Vonage will be required to pay $100 million in refunds to consumers harmed by the company’s alleged actions, make its cancellation process simple and transparent, and stop allegedly charging consumers without their consent.

“Today the FTC delivers on our commitment to protect consumers from illegal dark pattern tactics by companies that prevent consumers from cancelling their services,” said FTC attorney Samuel Levine, Director of the FTC's Bureau of Consumer Protection. “This record-breaking settlement should remind companies that they must make cancellation easy or face serious legal consequences.”

New Jersey-based Vonage provides internet-based telephone services (aka Voice Over Internet Protocol, or VoIP) to consumers and small business. According to the FTC’s complaint, the company bills their customers for these services on an automatic basis every month, either by charging a credit or debit card or withdrawing money from a customer’s bank account directly. Consumer accounts ranged from $5 to around $50 each month, while business accounts could cost up to thousands of dollars each month. An FTC lawyer states that in many cases, the company signs customers up using “negative option” plans that begin with a free trial, but require the customer to take action to avoid being charged.

In its complaint, the FTC alleges that Vonage has provided numerous ways to easily sign up for their plans, it has made the cancellation process markedly more difficult, leaving consumers and businesses on the hook for services they no longer want. Vonage’s practices, the complaint alleges, harmed consumers in numerous ways, specifically by:

• Eliminating cancellation options: Despite allowing its customers to sign up for services online, over the phone, and through other venues, the complaint alleges that starting in 2017, Vonage made the decision to force customers to cancel only by speaking to a live “retention agent” on the phone. The complaint notes that this practice runs counter to Vonage’s own advice to its clients not to “frustrate customers by requiring them to contact you for support that should be available on a self-service basis” and that “[i]t should be just as easy to return your product as it is to buy it.”

• Making cancellation process difficult: In addition to forcing customers into one cancellation method, it made that method difficult, according to the FTC. The company purportedly created significant cancellation hurdles, including by making it difficult to find the phone number on the company website, not consistently transferring customers to that number from the normal customer service number, offering reduced hours the line was available and failing to provide promised callbacks. The complaint cites one internal Vonage email saying customers were “sent in a circle when they want to downgrade or remove the service.”

• Surprising customers with expensive junk fees when they tried to cancel: In many cases, customers who are able to access the cancellation line are allegedly told they will have to pay an unexpected early termination fee that was not clearly disclosed when they signed up for Vonage service.

• Continuing to charge customers even after they canceled: Customers that managed to speak to an agent and request cancellation often found that their accounts continued to be charged, as alleged by the FTC. Even when they contacted Vonage to complain, they purportedly received only partial refunds of the money they were charged without authorization.

As a result of the FTC’s action, Vonage has agreed to a proposed court order that would require it to:

• Stop unauthorized charges: Vonage will be required to have consumers’ express, informed consent to charge them.

• Simplify cancellation: Vonage will be required to put in place a simple cancellation process that is easy to find, easy to use, and will be available through the same method the consumer used to enroll (e.g., website, email address, or other application).

• Stop using dark patterns: The order prohibits Vonage from using dark patterns to frustrate consumers’ cancellation efforts.

• Be upfront with consumers about subscription plans: The order requires Vonage to be upfront with customers about the terms of any negative option subscription plans, including any action that must be taken to avoid being charged and timeline in which that action is required.

• Pay $100 million to be used for refunds: Vonage would be required to turn over $100 million to the FTC to be used to provide refunds to consumers.

The proposed court order also requires Vonage to send email confirmations immediately after an order is placed online and within two days of phone or mail orders. Again, this order confirmation is not found in ROSCA but is found in many state statutes.

A knowledgeable FTC defense lawyer that advise advertisers and marketers in legal regulatory matters can advise on strategies that lessen the likelihood of regulatory scrutiny, or on matters of defense in the event you or your company have been made the subject of an investigation or enforcement action.

Takeaway: The FTC continues to focus on ROSCA, free trials, negative options and “dark pattern” cancellation processes made-up of design choices and psychological tactics that influence consumers’ purchase decisions. The requirements of the Vonage settlement are, in some instances, more restrictive than provide for by ROSCA. Query whether those requirements suggest what the FTC might require going forward.