Impact of Guidelines on Prevention and Regulation Dark Patterns on Fintech Companies
In the app-driven era, new entrants constantly join the market. Yet, companies owning these apps grapple with the challenge of retaining customers and expanding their user base, given the trend of users uninstalling apps within 7 days of installation. Consequently, companies resort to various marketing practices to prolong user engagement with the app.
To regulate such marketing practices, the Central Consumer Protection Authority has on 30th November 2023 notified the Guidelines for Prevention and Regulation of Dark Patterns, 2023 (referred to as the “Guidelines”) which aims at prevention and regulation of dark patterns.
At the outset, the Guidelines defines “dark patterns” as “practices or deceptive design pattern using user interface or user experience interactions on any platform that is designed to mislead or trick users to do something they originally did not intend or want to do, by subverting or impairing the consumer autonomy, decision making or choice, amounting to misleading advertisement or unfair trade practice or violation of consumer rights.” The Guideline prohibits explicitly any person, including any platform from engaging in any dark pattern practice.
The Guidelines also defines “specified dark patterns” to include the following:
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False Urgency: |
when a company deliberately makes the customers believe that a product would soon be out of stock, so that they would make an immediate purchase. For example, BUY THE LAST PAIR OF LEWIS JEANS!! STOCK GETTING OVER SOON. |
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Basket sneaking: |
Adding items in the cart at the time of checkout without the consent of user for commercial gain. For example, a check box already ticked off at billing “Donate 3 Rupees to the Children of India foundation.” |
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Forced action: |
Forcing a user into taking an action that would require the user to buy any additional goods or subscribe or sign up for an unrelated service or share personal information in order to buy or subscribe to the product or service originally intended by the user. Such as, asking the customer to sign up and link Gmail accounts before buying the products. |
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Subscription trap: |
Process of making cancellation of a paid subscription complex process. For example, hiding the cancelation option for the subscription. |
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Disguised advertisement: |
Practice of posing advertisements as other types of content such as user generated content or new articles or false advertisements, which are designed to blend in with the rest in order to trick customers into clicking on them. Such as, CHECK OUT THIS NEW ARTICLE OF 5 BEST SITES TO BUY SHARES FROM TODAY!! |
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Nagging: |
Dark pattern practice due to which a user is disrupted and annoyed by repeated interactions, in the form of requests or information, to effectuate a transaction and make some commercial gains, unless specifically permitted by the user. Such as, BUMPER DISCOUNTS JUST FOR TODAY. |
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Saas billing: |
Process of generating and collecting payments from consumers on a recurring basis in a software as a service (SaaS) business model by exploiting positive acquisition loops in recurring subscriptions to get money from users as surreptitiously as possible. |
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Rogue Malwares: |
Using a ransomware or scareware to mislead or trick user into believing there is a virus on their computer and aims to convince them to pay for a fake malware removal tool that actually installs malware on their computer. |
The above are in no way an exhaustive list and the as mentioned in the definition of “specified dark patterns”, the CCPA may from time to time keep adding items to this list.
The Guidelines have a profound impact as they seek to safeguard consumer rights by explicitly forbidding the psychological manipulation of consumers. Beyond this, the Guidelines prove advantageous to companies by fostering a trust-based environment, consequently promoting sustained consumer engagement. By setting clear standards and boundaries for ethical practices, the Guidelines not only protect consumers from potential abuses but also encourage companies to prioritize transparency and integrity in their interactions with consumers. This commitment to ethical conduct contributes to the creation of a positive and enduring relationship between companies and consumers, ultimately benefiting both parties in the marketplace.
Authored by: Namrata Dubey (Senior Associate), Vanshika Kundra (Associate) and Deepanjali Jain (Intern).
