Marketing professionals are constantly thinking of new ways to get new customers and motivate purchases. But at some point, those tactics can become deceiving and affect consumers. This is the case for Publisher’s Clearing House (PCH), a marketing firm well-known for its sweepstakes programs that was recently investigated by the Federal Trade Commission (FTC) over fraudulent and misleading activities like dark patterns.
Keep reading to learn more about this case and what was the conclusion of the FTC. If you’re a consumer, this information will help you avoid unethical tactics by companies. And if you’re a marketer, this article will give you an overview of prohibited marketing tactics.
The Complaint Against Publisher’s Clearing House
In the complaint against PCH, the FTC investigated a number of dishonest tactics, focusing on dark patterns. Below we dive deeper into the dark patterns used by PCH and the other violations the FTC uncovered.
Dark Patterns
Dark patterns are interfaces or customer experiences on websites or apps purposefully designed to urge people in a certain direction without their full knowledge or comprehension of the consequences. As the name suggests these are deceptions that push people into certain paths that end in a purchase. In the case of PCH, they created dark patterns that pressured and deceived sweepstakes participants into buying merchandise, even though such purchases were not necessary for entry.
PCH’s website mislead people into thinking that purchasing merchandise was a requirement for joining the sweepstakes or that doing so would increase their chances of winning. And the FTC found this tactic used several times across the user journey. More specifically, the FTC found misleading language and visual distractions that equated placing a purchase with joining sweepstakes. Plus, important disclosures were hidden in places where people were unlikely to see them.
PCH also constantly sent emails to customers urging them to respond quickly and insinuating that failure to do so would disqualify them from the sweepstakes and contests. This pressure made consumers feel obligated to spend money they didn’t have to spend.
Violation of the CAN-SPAM Act
The Controlling the Assault of Non-Solicited Pornography and Marketing (CAN-SPAM) Act was passed in 2003 to protect consumers from deceptive marketing strategies related to email communication.
Companies are required by this rule to make sure that the email subject lines of their emails appropriately reflect the email content or are somewhat related. PCH didn’t respect this act and used subject lines that referred to bogus papers with names that sound like those of legitimate government organizations, such as the IRS. An example of one of these subject lines is “High Priority Doc. W-10 Enclosed”. As you can tell, this subject line appears to be from the IRS regarding important documentation. But obviously, that had nothing to do with the actual email content. This is a clear deception tactic that shamelessly pressures people into opening emails.
Privacy Policy Misrepresentation
This violation from PCH refers to the sharing of personal data with other parties and how it is disclosed to customers. All companies must disclose what data they gather from users and what they do with it. If there is some kind of exchange of this data with other companies, then it has to be clearly stated in the privacy policy.
The privacy policy of PCH stated that they did not rent, license, or sell customer information to outside parties. It stated this up until around January 2019. However, the truth is that PCH did actually share user data with a variety of unaffiliated parties, such as advertising agencies, publishing houses, and marketing cooperatives. These third parties then used the data to advertise to consumers.
This was a direct lie to consumers, and obviously, an unethical practice that is not permitted.
Other False or Misleading Statements
Statements regarding the total cost of products and the apparent risk-free nature of customer orders were also a key part of the investigation. PCH misrepresented the true cost and hazards related to its products and services across its website, user interface, email, and other marketing activities.
All marketing communication needs to be honest and transparent with consumers. It’s one thing to write engaging copy, but it’s unethical to say untrue things that give people a false perception.
The Proposed Stipulated Order
The proposed order mentions the measures taken to penalize PCH for using sneaky tactics and dubious business practices. These standards were created to prevent such behavior in the future and to encourage openness and compliance throughout the business’s operations. Below are the main measures from the FTC.
Prohibition of Dark Pattern Practices
The ruling forbids PCH from hinting or recommending to customers that they must buy something to enter a sweepstake or that a purchase increases their winning chances. This requires a definite division between content on PCH’s platforms related to sweepstakes and content related to product orders. This way both operations are separated and don’t mislead people.
PCH must also provide a visible disclosure explicitly informing people that making a purchase is not necessary to enter the sweepstakes. Also, they can’t send users to pages connected to product purchases when they try to enter sweepstakes.
Preservation of Dark Pattern-Relevant Records
PCH is required to keep records about their usage of dark patterns to monitor and evaluate compliance with the FTC. These records include information on how advertisements, marketing materials, and sweepstakes promotions are received by consumers. The FTC will be able to closely monitor the company’s compliance with the order and make sure that dark patterns are eliminated.
Compliance With CAN-SPAM Act
The order makes a strong emphasis on adhering to the CAN-SPAM Act. This means PCH can no longer send emails with deceptive subject lines. Their subject lines now have to be directly related to the content of the emails. Clickbait subject lines can also violate this act if they are not related to the email content.
Prohibition Against Data Use Misrepresentations
The judgment forbids PCH from making any false claims about the gathering, using, storing, or disclosing of customer personal data. This is one of the most basic practices with which all businesses must comply. It’s better to be transparent with customers.
Destruction of Consumer Personal Information
PCH is also obligated to remove all consumer personal data obtained before January 2019. This way the privacy of customers whose data may have been obtained under false pretenses will be protected. From now on, the company has to obtain its data ethically.
Monetary Judgment
The decision also contains a $18.5 million fine that PCH must pay to the FTC. The Commission will then use the money to reimburse consumers and make up for any harm that the misleading business practices may have caused.
Key Takeaways for Businesses
Considering the Publisher’s Clearing House Sweepstakes case and the FTC rulings, it’s clear that all types of digital businesses need to be transparent to their customers in their user interface and privacy policies. Businesses need to make sure that their marketing teams do not step over the line with their initiatives. Dark patterns might bring in more sales momentarily, but it’s unethical to purposefully deceive and pressure people into spending more money. Eventually, this practice can lose the business more customers than the ones they gained, since they will compromise their customer’s trust. Plus, they also risk a hefty fine.
Another thing to keep in mind is to closely monitor their email marketing strategies and follow the CAN-SPAM Act’s guidelines. Avoid using misleading subject lines. Businesses should focus on getting more sales through honest practices and gaining consumer trust because no one wants to support a company that deceits them.
SOURCES:
Federal Trade Commission. FTC Takes Action Against Publishers Clearing House for Misleading Consumers About Sweepstakes Entries
Federal Trade Commission. COMPLAINT FOR PERMANENT INJUNCTION, MONETARY RELIEF, AND OTHER RELIEF
Federal Trade Commission. EXHIBIT 1
