Australia expected to regulate dark patterns and other unfair trading practices in 2025

January 13, 2025

Key points

• Late in 2024, Australia's Commonwealth Government sought feedback on proposals to prohibit unfair trading practices. These include certain unfair trading practices impacting subscriptions, drip pricing, dynamic pricing, requiring online accounts (instead of guest checkouts for online transactions), creating barriers to accessing customer support or other unfair trading practices known as "dark patterns".
• Reforms are expected in 2025.
• They are likely to impact all businesses who carry on business in Australia - especially online businesses - whether transacting with consumers or small businesses.
• Given many businesses engage in legitimate marketing practices which may be outlawed in future, business should review their practices ahead of the new laws and prepare for the changes and keep a watching brief on developments.

Background

By way of background to the recent proposals:

• In September 2022, the Australian Commonwealth, state and territory consumer ministers agreed that the federal government would lead a public consultation on options to address unfair trading practices on behalf of all jurisdictions; and
• In August to November 2023, further consultation was conducted as to the nature of unfair trading practices in Australia and the extent of consumer and small business harm arising from potential gaps in the Australian Consumer Law as well as policy options to address unfair trading practices in Australia (the Consultation Regulation Impact Statement).
• The latest consultation in November to December 2024 sought specific feedback on the proposal to address unfair trading practices by amending the Australian Consumer Law (ACL) to add:
  • a general prohibition that is principles-based; and
  • specific prohibitions targeting certain unfair practices.

Introduction

Australia's regulators and policy makers are not alone in considering the multitude of ways in which consumers or others can be targeted and manipulated online through effective marketing tactics by online businesses. See for example:

• the 2024 global data protection authorities collaboration to review over 1000 websites; and
• the new laws in 2024 in the United Kingdom to regulate unfair commercial practices; and
• US proposals in 2024 to target deceptive practices

Late in 2024, Australia's Treasury canvassed feedback on the design of general and specific prohibitions against certain unfair trading practices with a supplementary consultation.

Specifically in focus are:

• subscription-related practices;
• drip pricing practices and hidden fees;
• dynamic pricing;
• online account requirements;
• barriers to accessing customer support; and
• dark patterns.

Proposed amendments to the Australian Consumer Law:

The consultation paper notes that the Australian federal government intends to introduce general and specific prohibitions on unfair trading practices.

The focus is on conduct that distorts, manipulates or undermines consumer choice, without necessarily being misleading or deceptive, such as practices that create an undue sense of urgency or scarcity; subscription related practices, including practices which make it difficult for consumers to cancel a subscription; pricing-related practices, including drip pricing, dynamic pricing and hidden fees; and post-sale practices, including imposing unreasonable barriers to accessing customer support.

The Commonwealth Government states in its consultation paper that they propose a general prohibition on unfair trading practices to capture a business's conduct where it:

• unreasonably distorts or manipulates, or is likely to unreasonably distort or manipulate, the economic decision-making or behaviour of a consumer; and
• causes, or is likely to cause, material detriment (financial or otherwise) to the consumer.

It is also proposed that the Australian Consumer Law (ACL) specify a non-exhaustive list of examples of conduct (referred to as a grey list) which may, depending on the circumstances, meet this test.

What is proposed for the grey list of example unfair trading practices?

It is proposed the grey list includes the following examples:

• the omission of material information;
• the provision of material information to a consumer in an unclear, unintelligible, ambiguous or untimely manner, including the provision of information in a manner that overwhelms, or is likely to overwhelm, a consumer;
• impeding the ability of a consumer to exercise their contractual or other legal rights; or
• use of design elements in online consumer interfaces that unduly pressure, obstruct or undermine a consumer in making an economic decision.

What is unreasonable distortion or manipulation?

The paper seeks feedback on whether the concept of unreasonableness should be incorporated into a general prohibition and says it is intended that, by confining the application of the prohibition to only conduct which is unreasonable, common-place and legitimate marketing tactics employed by businesses will not be captured.

The paper canvasses an alternative approach - to include a legitimate interest element as the third limb of the proposed general prohibition (potentially as a rebuttable presumption, meaning the onus is on the advantaged party to prove that the term is necessary to protect its legitimate interest).

What are the unfair trading practices that are likely to be regulated?

The paper focussed in particular on the following potential unfair trading practices.

• Dynamic pricing: The paper draws a distinction between dynamic pricing (where the price increases during the course of a purchasing process) and surge pricing (where prices are raised in response to increased demand for items in low supply). Problematic dynamic pricing practices may occur paired with other tactics that exert pressure on consumers, such as timeout counters and scarcity notifications. The paper notes that there are similarities also between bait advertising and dynamic pricing practices.
• Online account requirements: Also targeted are businesses who require consumers or small businesses with no option to make an online purchase as a guest - rather than requiring the setting up of an account (with login and providing personal information) as a prerequisite before conducting a transaction. The paper notes that forcing online account registrations can result in customers being required to disclose more personal information than is reasonably necessary in order to purchase the product or service.
• Barriers to accessing customer support: Examples of unfair trading practices highlighted also include designing customer service systems in a manner which makes it unreasonably difficult for consumers to contact a business (the paper notes as examples a business not providing a point of contact for consumers or requiring consumers to use a particular service channel such as a chat bot) or requiring customers to provide unnecessary information in order to access benefits or to obtain a remedy. Another example noted is where there is unreasonably long delays in providing customer service.
• Dark patterns: The paper refers to the Organisation for Economic Co-operation and Development (OECD)'s taxonomy for commercial dark patterns - categorising these as follows:
  • forced action: dark patterns in this case involve seeking to force the consumer to do something in order to access a specific functionality;
  • interface interference: dark patterns in this category involve privileging specific actions from the consumer favourable to the online business - such as through framing of information, or anchoring effects/default biases;
  • nagging: these dark patterns involve repeated requests to the consumer to do something favourable to the business, such as turn on notifications or location-tracking. The paper notes that a consumer's limited willpower or time can be exploited in this way;
  • obstruction: these dark patterns aim to make a task flow or interaction more difficult than it may inherently need to be - with the intent to dissuade an action and so exploit consumer inertia, limited willpower or time. The example noted is the making it easy to sign up to a service/opt in to privacy-intrusive settings but making it hard to cancel the service or opt out to more privacy-friendly settings;
  • sneaking: sneaking aims to hide, disguise or delay the divulging of information relevant to a consumer's decision (particularly regarding costs) - which may exploit limited attention, default bias, an anchoring effect or a sunk cost fallacy in consumers;
  • social proof: social proof tactics attempt to trigger a decision based on observations of other consumers' behaviour - exploiting social proof bias. The paper notes as examples notifications about other consumers' activities and testimonials about their recent purchases;
  • urgency: this category involves imposing real or fake temporal or quantitative limits on deals to pressure the consumer into making a purchase. Examples include low stock and high demand messages or a countdown timer to indicate an expiring deal or discount.

Dark patterns (also called deceptive patterns), refer to a range of mostly design-related elements used in consumer-facing interfaces (like websites and apps) and choice architecture.

The paper notes that the central characteristics of dark patterns are that they distort, impair, subvert, or otherwise manipulate consumer decisions and actions, undermining autonomy and they can influence consumer choice by exploiting cognitive and behavioural biases or by exploiting how people learn or solve problems.

Some nudge users towards consenting to more privacy intrusive practices or settings which may not reflect their own privacy preference.

Other dark patterns add complexity and obstacles that frustrate and exhaust consumers (such as confusing/complex menus, pre-selected checkboxes or providing difficult paths to options (like rejecting third-party cookies or cancelling a subscription). Some businesses force consumers to a particular action by not providing alternatives or by omitting or obfuscating material information.

Other businesses may exert unreasonable pressure during a purchase - for instance by displaying countdown timers, low stock notifications etc to create a heightened sense of urgency and scarcity to provoke action. The paper also refers to "confirmshaming" - where a consumer is unfairly made to feel bad about a choice.

The paper however notes that the use of a single dark pattern may not, on its own, unreasonably distort consumer choice or result in material consumer detriment. The concern will be greater where multiple dark patterns are combined to confuse, shame, direct or frustrate consumers into making particular decisions online or take other actions to their detriment.

Next steps

We expect 2025 to herald the introduction in Australia of a general prohibition on unfair trading practices - and, based on the approach to prohibitions against unfair contract terms (see Dentons - Happy birthday to Australia's Unfair Contract Terms laws), we consider it likely the new laws will apply to business to consumer dealings as well as business to small business dealings.

The paper also seeks views on whether unfair trading practices prohibitions should also apply to financial services (which are regulated by the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act)) to align the Australian Consumer Law and financial services regulations.

Business should review their practices ahead of the new laws and prepare for the changes. Many practices being scrutinised may be legitimate marketing practices. Given these may be outlawed, a watching brief on developments should be maintained.

Please contact Partners Robyn Chatwood, Vanessa Gore, Elise Ivory, or your usual contact in Dentons if you would like advice about these matters.