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  • Voltaire Staff

Starbucks accused of amassing $900 mn in 5 years by 'rigging' payment system



A consumer action group has moved court against Starbucks, accusing the global coffee chain of indulging in deceptive design practices, and amassing up to $900 million in unspent gift card and app money in revenue.


The allegation was made by the Washington Consumer Protection Coalition in a formal complaint it filed with the Attorney General of Washington on December 19, last year, against Starbucks Corporation.


The global coffee giant is now under scrutiny for allegedly indulging in unfair and deceptive practices to generate substantial cash inflows from its 33-million rewards programme members.


The company is accused of incorporating "dark patterns" into its payment platform, comprising the Starbucks mobile app and a reloadable digital payment card.


These dark patterns, considered manipulative design practices, reportedly lead customers to contribute more money than they initially intended, subsidising Starbucks' operations.


The Starbucks app, integral to the company's success, handled more mobile payments than Apple Pay or Google Pay, the group alleged.


In the last fiscal year alone, customers loaded approximately $15 billion onto Starbucks Cards, constituting 40 per cent of the company's global annual revenue, it said. These funds serve as interest-free operating capital for Starbucks.


Dark patterns are deceptive design techniques employed in user interfaces to manipulate individuals into making decisions against their best interests. These practices often trick users into unintended actions, such as spending more money or providing personal information.


The Federal Trade Commission (FTC) defines dark patterns as design elements that "trick or manipulate users into making choices they would not otherwise have made and that may cause harm."


The dark patterns include specific design features:

-        Allowing customers to reload cards on the mobile app only in specific amounts with a $10.00 minimum.

-        Setting a default reload amount of $25.00 on the app, displaying $15.00 as the lowest reload amount, despite the actual minimum reload amount being $10.00.

-        Limiting tipping through the app.

-        Disallowing customers from splitting payments across multiple methods when using their in-app card.

-        Patrons are restricted to adding funds in $5 increments.


These practices reportedly force customers to load inflated amounts onto their cards and prevent them from fully using small balances, effectively trapping them in a cycle of perpetual reloading.


The complaint quoted several individual consumers who expressed their frustration with being compelled to pay using preloaded funds, an inability to reload specific amounts, and perpetual card balances that cannot be spent down to zero. The customers felt being trapped in a "vicious cycle" of spending more and more money to stay above the minimum threshold.


Chris Carter, campaign manager for the Washington Consumer Protection Coalition, in a statement, said, "Starbucks rigs its payment platform so consumers are encouraged to leave unspent money on their cards and apps. Over the last 5 years, Starbucks has claimed nearly $900 million in unspent gift card and app money as corporate revenue, boosting corporate profits and inflating executive bonuses."


The complaint highlighted the frustration of Starbucks patrons who felt compelled to reload larger amounts onto their apps.


Brittany Ferguson, a customer service representative at SeaTac Airport, said, "I'm trapped in this weird cycle of being forced to spend money at Starbucks even when I don't want to."


Jackson Hoppis, a state employee and resident of Olympia, added, "I did not like having a balance on my Starbucks Card and I would prefer to do away with the card altogether and get my remaining balance back."


The loophole in Washington state law exempts gift cards from unclaimed property regulations, allowing Starbucks to retain unspent balances.


Misha Werschkul, Executive Director of the Washington State Budget and Policy Center, said, "Starbucks has taken that to the next level, increasing their revenue every year from unspent gift cards and building their entire mobile app on digital gift cards that are exempt from common-sense consumer protections."

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