Dark Patterns and Consumer Choice Architecture
Do you feel like you make rational, educated decisions as a consumer? It turns out that many of us are often misled, manipulated, or tricked by companies, especially online. Websites can be designed using dark patterns to manipulate consumers into sub-optimal choices. They use various means to make it difficult for consumers to determine and select financially prudent options, often leaving them saddled with higher fees and unnecessary services.
Dark Patterns Explained
There are many tools that web developers can use to misdirect and manipulate users. Although most are technically legal, many consumers’ rights proponents would consider them unethical, especially if they exist on websites used by minors. Often, these tools try to get users to sign up for purchases or subscriptions quickly, such as by showing a countdown timer indicating that a great deal is about to expire. Pop-ups may barrage the user with indications that a great deal is about to expire in minutes, imploring them to act quickly.
Countdown timers and frequent pop-ups may “nudge” consumers to hurry up and buy, but are not illegal. A more unethical dark pattern is hiding key information about services for sale, especially things that involve price increases. For example, customers may quickly purchase a digital subscription that seems like a great deal…only to discover on the next page that the price will go up every six months and there is a termination fee. A common icing on the proverbial cake when it comes to dark patterns is the opposite relationship between ease of registration and difficulty of cancellation. Websites often make it very easy to buy or upgrade, but extremely difficult to cancel services.
Economics of Dark Patterns
Increased Revenue
It doesn’t take an economist to realize that sellers benefit from dark patterns through increased revenue - more customers lured in and fewer customers able to terminate their agreements. Some customers may give up on trying to cancel service, especially for a low-cost subscription, and begrudgingly allow the monthly fee to continue. Customer data gained during enrollment or purchase, perhaps unethically using dark patterns, may also be a source of revenue if it can be sold to other companies.
Reduced Demand
Consumers may grow frustrated by the apparent manipulations of many companies’ websites and thus seek to avoid them. This can lead to reduced demand for new services or options, with customers deciding to stick with what they have. There may be a widespread perception that companies avoid customer service, especially when it comes to reducing or cancelling services. As a result, even though companies may make increased revenue from existing customers through dark patterns, they may see reduced revenue from new customers.
New Opportunities for Nonprice Competition
Although companies’ increased use of dark patterns in web design may have heightened the wariness of consumers, this wariness can create new opportunities for start-ups that want to compete on customer service rather than price. In an era of relentless focus on automation, which often involves replacing human customer service employees with AI chatbots, a start-up may attract cynical customers by promising human customer service and transparency in pricing and operations. Dark patterns may open the door for competitors that don’t offer the lowest prices, but rather promise traditional customer service.
Effects on Consumers
Reduction of Consumer Surplus
Consumer surplus exists when consumers are able to purchase a good or service at a market price below their level of demand, which is the amount they are willing and able to pay. Dark patterns reduce the level of consumer surplus by strategically manipulating consumers into paying more than they originally intended. This can occur when consumers are influenced to pick more expensive products or plans than they initially explored, especially through misleading information. Misleading pricing and automatic renewal programs can directly lead to reduced consumer surplus, as consumers are paying more than they think. This surplus is transferred to the producer, who is now receiving more money per unit of service than was required for them to offer it for sale.
Asymmetrical Information Leads to Some Market Failures
Consumers may begin to exit the market due to fears of asymmetric information that make it impossible to make optimal economic decisions. While consumers may not be able to exit most markets where dark patterns are utilized in websites, some that are considered luxuries rather than necessities may be at risk of market failure. This would encompass entertainment websites, including online gambling and gaming. These non-necessity services can be replaced with substitutes, such as in-person activities.
Regulatory Responses to Dark Patterns in Web Design
The use of unfair and manipulative practices is broadly illegal, but there is difficulty in enforcing these sometimes vague terms. Regulatory agencies, such as the Federal Trade Commission (FTC) in the United States, can fine and criminally charge companies that engage in deceptive practices. In recent years, some major tech companies have been hit with substantial fines after consumer complaints alerted the FTC and other agencies to deceptive practices.
Challenges in Enforcement
Unfortunately, it can be difficult for regulatory agencies to charge companies with illegal behavior. First, many affected consumers may not know whom to contact with such complaints, as the FTC is not a widely-known government agency. Second, there is a lot of room for legal maneuvering in the area between “marketing” and “lying.” Finally, web design typically evolves faster than laws to regulate it, making it difficult to definitively label a company’s digital practices illegal. What may be seen as manipulative by some may be seen as regular advertising by others. When it comes to online purchases, what is the “reasonable person” standard a consumer should meet? Is a “reasonable person” expected to read all the fine print in a user agreement?
While some companies have been caught outright lying or omitting key information in their websites, intentionally misleading consumers, others have simply made it difficult and complex for consumers to track down all the pertinent information. Do companies have an obligation to make it easy for consumers to reduce or cancel services? As more and more of our commerce goes entirely online, look for these questions to be explored by regulatory agencies and legislatures.
