Communications company Vonage agreed on Thursday to pay $100 million to settle charges by the Federal Trade Commission over deceptive business practices.
The FTC alleged that Vonage charged customers monthly fees between $5 to $50 without the users’ knowledge and often without a clear way to cancel. The fees, charged automatically via consumers’ cards or bank accounts, can be even greater for businesses, the Wall Street Journal reported. The commission said it had received several hundreds of complaints from consumers about Vonage’s practices.
The New Jersey-based internet service provider offers internet telephone services, commonly known as Voice over Internet Protocol, or VoIP. Vonage is a subsidiary of Stockholm-based telecom giant Ericsson (ERIC).
“Today the FTC delivers on our commitment to protect consumers from illegal dark pattern tactics by companies that prevent consumers from cancelling their services,” Samuel Levine, director of the FTC’s Bureau of Consumer Protection, said in a statement.
“This record-breaking settlement should remind companies that they must make cancellation easy or face serious legal consequences.”
The FTC said the $100 million will be used to refund consumers.
The commission in recent months has sought to crack down on deceptive subscription schemes. The agency in September called on Amazon‘s executive chairman Jeff Bezos and CEO Andy Jassy to testify in a hearing about the company’s Prime membership.
The agency also introduced new rules in October 2021 relating to subscription-based services. According to the guidelines, companies are required to explicitly disclose the cost of services, cancellation policies, and obtain consent before charging customers.
This is not the first time Vonage has faced legal trouble relating to its business practices. In 2009, the company paid $3 million in settlement money to customers from 32 states over unauthorized charges dating back to 2004.
FTC attorney Stephanie Liebner noted the broad market implications of such deception, as companies like Vonage “can use consumer data to test what manipulates consumers most effectively.”
On Thursday, shares of Ericsson were at $5.38, down $0.07, or 1.38%, as of 02:29 p.m. ET.