Excerpt
Vonage was held liable by the court for charging customers without their consent, failure to provide required disclosures, and not offering simple mechanisms for customers to cancel their telephone services.
Our analysis
Vonage is a company that offers phone services to people and businesses using the internet. They automatically renew their services and charge people's credit cards or bank accounts without asking each time. By automatically renewing customers' subscriptions and requiring them to cancel through a live agent during limited working hours, Vonage makes it difficult for customers to cancel their services. They further complicate the process 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 (“ETFs”).
Vonage's business practices violate laws designed to protect consumers from deceptive and unfair practices. Specifically, their use of deceptive patterns such as hard to cancel, hidden information, and forced continuity, are in violation of Section 5 of the FTC Act, which prohibits unfair or deceptive acts or practices in commerce, as well as the Restore Online Shoppers' Confidence Act (ROSCA), which aims to protect online shoppers from deceptive billing practices. These practices violate ROSCA, which prohibits charging consumers for goods or services sold in transactions effected on the Internet through a negative option feature. Additionally, Vonage does not clearly and conspicuously disclose the existence and amount of Early Termination Fees to business and residential customers enrolling in their services, and they continue to charge customers for recurring service fees even after they have completed the required cancellation procedures. This violates Section 5 of the FTC Act, which requires clear and accurate information to be provided to consumers.
Outcome
As per the court order agreed upon by Vonage, the company will pay $100 million in refunds to affected consumers, implement a clear and transparent cancellation process, and discontinue charging consumers without their consent.
Parties
Federal Trade Commission and Vonage Holdings Corporation, Vonage America LLC and Vonage Business Inc.
Case number
Case 3:22-cv-06435
Decision
Related deceptive patterns
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.
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.
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.
Related laws
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.