By Mark Armstrong, Senior Associate

Two popular grocery delivery providers might be cooked after making subscription cancellation representations that do not cut the mustard against the statutory general protections afforded to all Australian consumers. Grocery Delivery E-Services Australia Pty Ltd (trading as HelloFresh) and Youfoodz Pty Ltd will square up against the ACCC in the Federal Court over allegedly misleading consumers through their subscription sign up and cancellation processes. Both companies are alleged to have breached the Australian Consumer Law (“ACL”), as contained within Schedule 2 of the Competition and Consumer Act 2010 (Cth), for a number of misleading representations. Specifically, subscribers were advised that they could easily cancel their subscription at any time before a delivery cut-off, only for said subscribers to later receive and be charged for their order, even after cancelling before the deadline.

The ACCC is seeking to rake these companies over the coals, with compensation orders, penalties, declarations, publication orders, and the implementation of a compliance program, as well as costs.  Read on as we digest what went wrong and what this means for you.

What happened?

HelloFresh and Youfoodz operate platforms consisting of websites and smartphone apps through which consumers could easily sign up to their grocery kit delivery services. Both companies’ platforms contained statements representing that new customers could easily pause, skip or cancel their subscription at any time via their online account settings, provided that the request was submitted before the cut-off time for their first delivery. Instead, customers could only cancel their first delivery via a phone call with the business’s customer service department. Consequently, across periods spanning over two years (for each company), over 60,000 HelloFresh customers and almost 40,000 Youfoodz customers incurred a fee even though they cancelled their first order before the specified deadline.

Additionally, the ACCC has alleged that HelloFresh made providing payment details mandatory before being able to view and select meal offerings, but included a statement that read, ‘You won’t be charged yet. Your payment details are needed to reserve your delivery’, which was not correct. After proceeding through the selection screens, HelloFresh consumers who saw this statement were then signed up to an ongoing subscription and their payment method was charged for the initial delivery, for some individuals, even without selecting meals. The sign up process was allegedly so confusing to the point that many HelloFresh customers only realised they had entered into an ongoing subscription after they received a delivery or payment notification.

Youfoodz’s unsubscribe processes were especially problematic, with some customers claiming that even after receiving confirmation that their first delivery would be cancelled without charge, they were charged for the first delivery as it could not be cancelled. The ACCC made its position on transparency in both sign-ups and cancellation for subscription services very clear, stating, “Traders must clearly communicate when consumers are signing up for a subscription, as well as how they are able to cancel and avoid being charged.”

Dangers of Dark Patterns

Based on the facts provided in the matter, it is likely that HelloFresh and Youfoodz were employing various methods known as ‘dark patterns’ as part of their subscription sign up processes, which likely contributed to the confusion suffered by customers. We have previously written about dark patterns (see Dark Patterns: digital deception and a threat to consumer rights, or just “digital marketing”?), which are tactics used by digital platforms and website operators to manipulate (either in a subtle way or a more aggressive way, like in this case) consumers’ decision-making when completing certain actions, such as subscribing to services online, adding items to their cart online or providing payment information. Here, any kind of dark patterns used have clearly overstepped the line of acceptability, as over 100,000 consumers between the two companies have been allegedly exploited as a result of providing information.

While there is no explicit and blanket prohibition on utilising dark patterns in Australia, where the use of these tactics amounts to a breach of the ACL, this brings exposure to action from a regulator, as has occurred here. In Europe, online platforms are banned from using dark patterns and the UK is on course to implement similar measures – if the ACCC is successful in this matter, this would strengthen the case for an equivalent legislative approach to be adopted in Australia, although as we understand it, there are no immediate plans to expand the Australian Consumer Law or to introduce new legislation to deal specifically with this issue. However, the ACCC have most certainly caught wind of the use of dark patterns and have already penalised businesses where their use of dark patterns amounted to a breach of the ACL (see our article referenced above). Specifically in relation to the HelloFresh and Youfoodz case, the ACCC’s Commissioner, Luke Woodward stated, “Businesses using confusing and complicated subscription cancellation policies is a matter of significant public concern and, where there is evidence of breaches of the Australian Consumer Law and consumer harm, the ACCC will take enforcement action when appropriate”. Accordingly, employing tactics that are rife with ambiguity and designed to misleadingly trap consumers into subscriptions could lead you to the chopping block.

What this means for you

Businesses offering subscription services (or any paid services) should pay close attention to this case and review their current advertising strategies, including any dark patterns utilised, as well as their sign-up/checkout processes. Businesses should review and confirm that all statements and representations made are factually correct and not misleading or unduly confusing. Further, businesses must ensure that they are able to act in line with their own representations, actioning requests in a timely manner and in a way that upholds the validity of their claims to customers. Failing to do so could prove costly, both in terms of dissatisfied customers and brand reputation, as well as potentially facing the wrath of the ACCC, who have a significant budget and regularly pursue businesses who demonstrate continued failures to comply with the ACL.

Contact us

If you would like further information on the above and how it impacts on you or your business, please contact one of our experts below. We can provide tailored legal and practical advice to assist you with reviewing your website and related materials, and any claims or representations made within those materials, or providing general advice on compliance with the Australian Consumer Law.