A recent study by LocalCircles found that 95% of listed companies use deceptive 'dark patterns' on their online platforms. The group has asked SEBI to make self-declarations mandatory for all listed firms to protect consumer interests. Investors should note this as governance standards for digital business operations could tighten soon.
A new study by the community platform LocalCircles has brought attention to the widespread use of deceptive user interface designs, known as 'dark patterns,' among publicly listed Indian companies. These practices, which include hidden charges, false urgency, and complicated subscription cancellation processes, are designed to nudge consumers into making unintended choices. The report indicates that approximately 95% of listed companies with consumer-facing online platforms currently employ these manipulative designs.
LocalCircles has formally requested the Securities and Exchange Board of India (SEBI) to include a 'dark pattern-free' self-declaration as a mandatory part of corporate governance disclosures. While SEBI has previously discussed a Common Advertisement Code to curb these practices in promotional material, this new proposal suggests expanding the requirement to cover the entire digital user experience, including pricing and consent mechanisms.
Potential Impact on Corporate Governance
For investors, the primary concern lies in the growing scrutiny of digital business practices. The study identified manipulative tactics across high-growth sectors such as digital lending, edtech, e-commerce, and online gaming. The use of 'forced action,' where users are compelled to perform tasks to access services, was reported at 72%, while 'drip pricing,' or revealing fees late in the transaction process, was found in 65% of cases.
If SEBI moves toward mandatory disclosures, companies will need to balance aggressive customer acquisition strategies with stricter compliance requirements. Increased regulatory focus often leads to higher operational costs as companies may need to redesign their websites and apps to ensure transparency. This shift could impact customer conversion rates for firms that heavily rely on these design patterns to drive revenue.
Sector and Compliance Outlook
The study noted that only a small number of companies, such as Easy Trip Planners, ECOS (India) Mobility & Hospitality, and specific units like Reliance Retail's Hamleys and Page Industries' Jockey, were identified as free from these practices. LocalCircles emphasized that past voluntary efforts have been insufficient, citing that a majority of firms that claimed to be 'dark pattern-free' to the Central Consumer Protection Authority did not meet the criteria upon review.
Investors should monitor future exchange filings and SEBI circulars for any official mandates regarding digital interface disclosures. The key monitorable will be whether companies adapt their digital platforms to meet these emerging transparency standards or face potential penalties that could affect reputation and long-term user retention.