Amazon ‘tricked and trapped’ customers with Prime service, FTC claims

Author: Editors Desk Source: Financial Times

June 21, 2023 at 21:23

US regulator goes after ecommerce giant in its latest lawsuit against Big Tech

The US Federal Trade Commission has sued Amazon, accusing it of duping customers into signing up for its Prime service without their consent and “sabotaging” efforts to undo their subscriptions.

The FTC said in the heavily redacted complaint filed on Wednesday that Amazon had used “manipulative, coercive, or deceptive user-interface designs known as ‘dark patterns’ to trick consumers into enrolling in automatically-renewing Prime subscriptions.”

Lina Khan, FTC chair, said in a statement: “Amazon tricked and trapped people into recurring subscriptions without their consent, not only frustrating users but also costing them significant money.”

Amazon called the FTC’s claims “false on the facts and the law”, saying it was “clear and simple” to cancel Prime membership.

It claimed the regulator had announced the case without any notice, “in the midst of our discussions with FTC staff members to ensure they understand the facts, context, and legal issues, and before we were able to have a dialogue with the commissioners themselves before they filed a lawsuit”.

The lawsuit is the latest salvo against Big Tech companies such as Amazon, Google and Meta that have been launched by Khan and other antitrust regulators in Washington as they crack down on what they have described as anti-competitive or anti-consumer business practices.

When it was first introduced in 2005, Amazon Prime cost $79 a year and offered subscribers free two-day shipping on purchases. It has expanded over the years to offer other services, including a Netflix-like digital video library, music, photos and gaming. As its offerings have grown, so has the cost, reaching $139 a year in the US. The value of the subscription can vary between consumers, depending on which services they use and how often.

The FTC alleged the issue with “nonconsensual enrolment” into Prime was “well known” within Amazon. Nevertheless, the company and its leadership “slowed, avoided, and even undid user experience changes that they knew would reduce nonconsensual enrolment because those changes would also negatively affect Amazon’s bottom line” , according to the complaint.

Prime subscription fees account for $25bn of Amazon’s annual revenue, according to the complaint. Last year the company’s revenue reached $514bn. According to Insider Intelligence, Amazon Prime users in the US are set to reach 174.9mn this year, representing roughly 66 per cent of the US population.

Amazon had “substantially revamped” the Prime cancellation process for some users ahead of the lawsuit, the FTC said. But before it did so, consumers had to “navigate a four-page, six-click, 15-option cancellation process”, according to the complaint, while signing up for Prime required just one or two clicks.

The main goal of the procedure — which Amazon called “Iliad” after Homer’s epic poem on the “long, arduous” Trojan war — was to “thwart” subscribers, the regulator alleged.

It is the second FTC challenge against Amazon in as many months. The company in May agreed to pay $25mn to settle a lawsuit brought by the FTC and the US Department of Justice charging the company with violating children’s privacy laws.

The regulators accused Amazon of storing children’s recordings captured by its Alexa voice assistant indefinitely and of “undermining” parents’ deletion requests. The group said it disagreed with the FTC’s claims.

Before she was nominated by President Joe Biden to lead the FTC, Khan published an academic paper calling for Amazon’s break-up.

Amazon has unsuccessfully requested Khan be recused from matters involving the company, citing her longstanding criticism. When asked about potential impartiality at a congressional hearing in 2021, Khan said she had “none of the financial conflicts or personal ties that are the basis of recusal under federal ethics laws”.

In the Prime case, the FTC is seeking monetary penalties as well as injunctive relief to stop it from continuing to harm customers.