22 February 2024
This financial year the priorities of the Australian Competition and Consumer Commission (ACCC) include consumer and fair-trading issues relating to manipulative or deceptive advertising and marketing practices in the digital economy; and competition and consumer issues relating to digital platforms.
As recognised by ACCC Chair, Ms Gina Cass-Gottlieb, digital platforms are underpinned by some of the most valuable companies in the world. Digital services markets are so fast-moving that regulation needs to be able to keep up with the rate of technological change in order to be effective. The efficacy of such regulation requires responsive action by regulators like the ACCC.
The ACCC’s focus on digital platforms and the digital economy is demonstrated by the attitudes expressed in its final report of the Digital Platforms Inquiry, and the action it has taken in the years since. It is seen too in the ACCC’s Federal Court litigation against online dating giant eHarmony Inc (eHarmony) for breaches of the Australian Consumer Law (ACL).
The ACCC v eHarmony proceedings
The proceedings were commenced on 7 September 2023. They concern allegations that eHarmony made false or misleading representations pursuant to section 29 of the ACL and engaged in misleading or deceptive conduct pursuant to section 18 of the ACL. The ACCC alleges that eHarmony:
- improperly advertised its services as ‘free dating’;
- failed to disclose that a subscription, once purchased, would automatically renew;
- failed to disclose accurate prices for its subscriptions;
- misinformed consumers that a ‘one month’ membership was available; and
- misled consumers as to their options to cancel their subscriptions.
The ACCC alleges that, as a result of the conduct, eHarmony deprived consumers of the opportunity to make informed decisions regarding their engagement with the dating website and app.
Notably, in a similar vein to victims of relationship scams, the ACCC argued that consumers who engage in online dating platforms may be more susceptible to subscription traps and misleading marketing claims due to emotional vulnerability.
At the time of writing, the ACCC v eHarmony litigation is ongoing.
‘Free’ digital services must actually be free
The ACCC alleges that eHarmony made representations that it provided a ‘free’ dating service, whereby consumers had the ability to engage in ongoing communications with other users on the platform for the purposes of developing romantic connections, free of charge.
However, users with a basic and free membership were limited to only being able to view blurred and unrecognisable profile photos, ‘like’ other users’ profiles, receive a single text message from a premium member, send a single reply, send a single virtual smiley face symbol, and send ‘icebreaker’ image-based conversational prompts.
There was no functional aspect of the ‘free dating’ services eHarmony advertised. Only users who paid to upgrade their membership had access to these key platform features.
eHarmony’s description of itself as a ‘free’ platform may be understood as a so-called ‘freemium’ business model. Freemium models often involve hiding key features of a ‘free’ platform behind a paywall. Alternatively, these models may attract consumers with free trials requiring payment information up-front, and then trap them into ongoing payments unless they navigate a difficult cancellation process before their trial ends.
The problems caused by freemium digital services has been within the sights of the ACCC for a while; most recently, it formed part of discussions in relation to Report 7 of the Digital Platform Services Inquiry.
eHarmony’s use of the freemium model seems particularly egregious, as the basic membership does not seem to possess any functionality at all that would allow a person to actually engage in ongoing communications with other users on the platform, let alone develop romantic connections.
The ACCC’s attempts to regulate online dating markets
The action taken against eHarmony underscores the policy position taken by the ACCC in its ‘Best practice guidelines for dating websites’.
Ironically, eHarmony had been consulted by the ACCC during the guidelines’ development as part of a working group of six dating site operators.
Back in 2014, the ACCC took part in a global initiative to ‘sweep’ online dating platforms for any misleading and unfair representations made in respect of services offered, any unclear pricing policies and any consumer contracts with unfair terms. The best practice guidelines were developed as a result of that initiative, for the purpose of increasing awareness of service providers safeguarding the interests of consumers.
The guidelines contain a section on Consumer Protection which covers fees and charges and use of personal information of consumers. Relevantly for eHarmony, in relation to fees and charges the guidelines state:
- online dating sites should clearly disclose all prices for dating services including any applicable fees and charges prior to the acceptance of any contract or request for payment; and
- where online dating sites offer services on a subscription basis, providers should make it clear and disclose upfront that membership is a subscription that is automatically renewed and incurs ongoing fees until cancelled.
Both of these prescribed guidelines seem to have been ignored by eHarmony.
Further regulation on the horizon
In September 2023, the Federal Government announced that the online dating industry has been asked to develop a new voluntary industry code of practice, or otherwise face further legislative regulation. The voluntary code would include commitments by platform providers to:
- improve engagement with law enforcement;
- provide support for at-risk users;
- improve safety policies and practices; and
- provide greater transparency about harms arising from online dating services.
This proposed regulation would complement the existing framework of the ACL, and the ACCC’s policy towards businesses involved in online dating markets, for the ultimate benefit of Australian consumers. Businesses engaged in this market segment should review their consumer offerings or risk facing action from Australian regulators.
View ProfileDisclaimer: The information published in this article is of a general nature and should not be construed as legal advice. Whilst we aim to provide timely, relevant and accurate information, the law may change and circumstances may differ. You should not therefore act in reliance on it without first obtaining specific legal advice.
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