Beware of consumer damages caused by ‘dark nudges’, including a free trial automatically converting into a paid subscription

- Consumers need to carefully check monthly invoicing details even though the amount of the fee to be charged is small -

   Recently, a “dark nudge*” has been emerging as a new type of consumer issue. “Dark nudges,” targeting the buying tendency of consumers who consider it bothersome to change their choices as the subscription economy** has expanded on online marketplaces, are occurring mostly in transactions related to online content including video or audio streams.

  Accordingly, the Korea Consumer Agency (President Lee Hee-sook) conducted an analysis and investigation of dark nudge-related consumer counseling cases and transactions in order to prevent damage to consumers.

□ ‘Discouraging consumers from terminating their subscriptions’ and ‘automatic payment’ account for the largest share of consumer counseling cases related to dark nudges.

  The number of consumer counselling cases related to dark nudges received at 1372 Consumer Counseling Center* for the last two (2) years and ten (10) months (January 2017~October 2019) was 77 in total. By type, ‘an act of discouraging subscription termination,’ which induced consumers to give up terminating their subscriptions by restricting methods of termination, accounted for the largest share at 49.3% (38 cases), followed by ‘automatic payment,’ which was made without notice after a set period of providing the service free of charge, at 44.2% (34 cases).

* 1372 Consumer Counseling Center is the only nation-wide integrated consumer counseling center, run by the Korea Fair Trade Commission, and With the press of number 1372, consumer complaints and redress are addressed with the participation of the Korea National Council of Consumer Organizations, the Korea Consumer Agency and local governments.

  In addition, ‘pressure-selling,’ which induced consumers to buy things by incorrectly advertising temporary special offers or large discounts, accounted for 5.2% (four (4) cases), followed by ‘misleading price,’ which caused price confusion among consumers, with 1.3% (one (1) case).

□ Content business operators need to inform consumers around the time they start charging a fee after a set period of providing the service free of charge.

  As the result of an investigation of the transactions concerning a dark nudge toward 50 apps that provide a subscription payment service at Google Play Store and Apple App Store, it was revealed that content business operators should take voluntary corrective actions, and steps need to be taken to improve the current system in order to prevent consumer damage.

  Usually, content business operators allow consumers to use content free of charge for a set period with their consent in an effort to induce their subscription, and only start charging a use fee upon the elapse of that period, unless they express unwillingness to continue using the service.

  However, there are consumers who inadvertently allow the operators to start charging them against their wishes due to a lack of knowledge about exactly when the operators start charging the fee. To prevent such cases, it is necessary to oblige the operators to inform consumers about the free-to-paid conversion around the time when they start charging the fee and indicate it on the app.

  The investigation found that out of 26 apps which start charging a fee after a short period of providing the service free of charge, only two (2) indicated that they inform consumers of the free-to-paid conversion around the time they start charging the fee.

□ It needs to strengthen the requirement that content business operators should inform consumers about automatic periodic payment of a fee beforehand.

  According to the Guidelines on the Protection of Content Users issued by the Ministry of Culture, Sports and Tourism, in the case of a contract for the use of content whose period is more than two (2) months and which requires periodic payment of a fee, the operators should inform the consumers of the invoicing details by text or email prior to payment. However, many operators did not observe this requirement, thereby causing consumer damage.

  Therefore, it is necessary to have such a requirement clearly stated in the relevant terms and conditions or on the app itself, but only one (1) of the 50 apps investigated indicated the requirement in its terms and conditions.

Furthermore, the amount of the fee to be charged should be clearly stated, but two (2) of the apps investigated indicated only the monthly amount, when in fact they should state the annual amount, which might confuse consumers. It was also found out that one (1) of the apps only allows consumers to terminate their subscriptions by phone even in the case of a contract signed through a mobile app.

□ KCA will advise operators who misled consumers about the amount of the fee to be charged and restricted methods of subscription termination to take voluntary corrective actions.

  Based on the result of the investigation, the KCA will advise the content business operators who misled consumers about the amount of the fee to be charged or restricted methods of subscription termination to take voluntary corrective actions, and recommend the Ministry of Culture, Sports and Tourism to revise the Guidelines for the Protection of Content Users in order to oblige operators to inform consumers around the time they start charging a fee.

  In addition, the KCA has asked consumers to prevent damage arising from unwanted payments by actively using mobile push notification services which inform them of the time content business operators start charging a use fee, and 2) to carefully check invoicing details every month even though the amount of the fee to be charged is small.