In today’s digital economy, subscription-based services have become the norm, from streaming platforms to gym memberships to cloud software. A growing number of companies are facing class action lawsuits over auto-renewal practices and the use of “dark patterns” – design tricks that make it difficult for consumers to cancel, understand, or even notice that they’re being charged.
The Core Problem
The core of the problem lies in how businesses present subscription terms and handle renewals. Consumers are pushing back against several corporate practices including:
- Automatically renew subscriptions without clear or conspicuous notice
- Make cancellation difficult through complex or hidden pathways
- Bury key terms in fine print
- Or use manipulative UX/UI designs to steer users away from canceling
These tactics, often referred to as “dark patterns,” include misleading button labels, endless menus, or confusing messaging that leads users to stay subscribed unintentionally.
Class Actions and Enforcement
A wave of class action lawsuits has emerged across the country, alleging that companies that deploy dark pattern tactics are running afoul of consumer protection laws. Plaintiffs have claimed that these tactics amount to deceptive practices, in violation of both federal and state laws. In addition, some states including California and New York, have strict auto-renewal laws that require clear consent before a subscription begins and easy accessible mechanisms to cancel.
The Federal Trade Commission (FTC) and state attorneys general have also started cracking down on these practices. In 2022, the FTC issued updated guidance on subscription practices, warning businesses that failure to obtain clear consent and provide easy cancellation could result in enforcement action.
Subscription Industry Implications
The subscription model may be profitable for businesses in the short term, but it’s increasingly leading to class actions, regulatory enforcement, and consumer distrust. Businesses must balance prioritizing user-friendly sign-up regimes when consumers truly want a subscription with being transparent so that consumers know what they are signing up for.
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