An Amazon Prime delivery vehicle in downtown Pittsburgh, Pa., on March 18, 2020.Gene J. Puskar/The Associated Press
Amazon AMZN-Q was sued Wednesday by Federal Trade Commission for what it called a year-long effort to enroll consumers without consent into its Prime program and making it difficult for them to cancel their subscriptions.
In a complaint filed in the U.S. District Court for the Western District of Washington, the agency accused Amazon of using deceptive designs, known as “dark patterns,” to deceive consumers into enrolling in the program. It said the option to purchase items on Amazon without subscribing to Prime was more difficult in many cases. It also said that consumers were sometimes presented with a button to complete their transactions – which didn’t clearly state it would also enroll them into Prime.
Internally, Amazon called the process “Iliad,” a reference to the ancient Greek poem about lengthy siege of Troy during the Trojan war.
Company leaders slowed or rejected changes that made cancelling the subscription easier, the complaint said. It argued those patterns were in violation of the FTC Act and another law called the Restore Online Shoppers’ Confidence Act.
Launched in 2005, Prime has more than 200 million members worldwide who pay $139 a year, or $14.99 a month, for faster shipping and other perks, such as free delivery, returns and the streaming service Prime Video. In the first three months of this year, Amazon reported it made $9.6-billion from subscriptions, a 17 per cent jump from the same period last year.
In a news release announcing the lawsuit, the FTC said though its complaint is significantly redacted, it contains “a number of allegations” that backs up its accusations against Amazon. It also accused the company of attempting to hinder the agency’s investigation into Prime, which began in 2021, in several instances.
“Amazon tricked and trapped people into recurring subscriptions without their consent, not only frustrating users but also costing them significant money,” FTC Chair Lina Khan said in a prepared statement. “These manipulative tactics harm consumers and law-abiding businesses alike.”
In the past two years, the agency has been ramping up its enforcement against deceptive sign-up and cancellation tactics that could manipulate consumers into buying products or services they don’t want. In December, it said Epic Games Inc., the maker of the popular Fortnite video game, would pay $245-million in customer refunds for deceptive payment methods. In November, the telecom company Vonage settled a similar case for $100-million.
The lawsuit also comes as Amazon is facing heightened regulatory scrutiny as it moves to expand its e-commerce dominance and dip its toes into other markets, including groceries and health care.
Some anti-monopoly groups celebrated the lawsuit on Wednesday shortly after the FTC’s announcement. Amazon did not immediately respond to a request for comment on Wednesday, but NetChoice, a tech lobbying group that counts the online retailer as one of its members, released a statement calling the lawsuit absurd.
“The complaint is that Amazon encourages people to use Amazon Prime – this is like going after Kroger for promoting its rewards program or Costco for its membership club,” Carl Szabo, the group’s vice president and general counsel, said in a statement. “It is abundantly clear that the FTC is a runaway agency in need of greater oversight. Congress must engage in robust oversight to rein in the FTC by cutting funding and investigating its ethical lapses and abuse of power.”
The industry group also pointed to Khan’s prior criticism of Amazon, and accused her of using the lawsuit “to attack American businesses she doesn’t like.”
Khan, 34, burst onto the antitrust scene in 2017 with her massive scholarly work as a Yale law student, “Amazon’s Antitrust Paradox.” In 2021, Amazon asked unsuccessfully that she remove herself from separate antitrust investigations into its business, arguing that her public criticism of the company’s market power before she joined the government makes it impossible for her to be impartial.
The U.S. and Amazon have traded barbs for over the investigation.
Last year, Amazon accused the FTC of harassing its executives, including founder Jeff Bezos, as the agency sought to get the company’s top brass to testify as part of the probe.
The tech giant has also faced other lawsuits accusing its Prime cancellation process of being too complicated. While under scrutiny from the FTC, the company in March provided consumers with instructions on how to cancel their Prime memberships in a blog post.
The lawsuit follows another Amazon-related win by the agency just a few weeks ago. Earlier this month, Amazon agreed to pay a $25-million civil penalty to settle allegations it violated a child privacy law for storing kids’ voice and location data recorded by its popular Alexa voice assistant. It also agreed to pay $5.8-million in customer refunds for alleged privacy violations involving its doorbell camera Ring.