U.S. Federal Trade Commission Accuses Amazon of Deceptive Prime Subscription Practices
The U.S. Federal Trade Commission (FTC) recently alleged that e-commerce titan Amazon.com has been engaging in misleading practices by enrolling millions of consumers into their paid subscription service, Amazon Prime, without their explicit approval and creating obstacles for those seeking to cancel their membership. This is one of the FTC’s most recent actions targeted against Amazon’s questionable business practices.
The FTC has legally challenged Amazon in the federal court of Seattle, asserting that the company consciously deceived countless consumers into inadvertently signing up for Amazon Prime. Amazon countered these claims, maintaining they are inaccurately represented in both fact and legal considerations.
The agency further claimed that Amazon exploited manipulative, coercive, or deceptive user-interface designs, commonly referred to as ‘dark patterns’, to hoodwink consumers into subscribing to the automatically renewing Prime subscriptions. The FTC, seeking civil penalties and a permanent injunction, aims to prevent any future instances of these transgressions.
This lawsuit is part of an overarching initiative by President Joe Biden’s administration to curtail the monopolistic market power of big tech companies like Amazon, Apple, and Meta and foster greater competition to safeguard consumer rights.
According to the FTC, Amazon Prime stands as the world’s largest subscription program, yielding an annual revenue of $25 billion. The service provides quick, free shipping for millions of items, numerous discounts, and access to a broad range of movies, music, and television series, among other perks.
Prime subscribers in the U.S., who pay $139 annually, contribute significantly to Amazon’s overall sales volume. With over 200 million members globally, Prime proves essential to Amazon’s myriad other enterprises, including their streaming service Prime Video and grocery delivery operation.
Amazon responded to these allegations by stating, “Customers unequivocally love Prime, and we have intentionally made it a transparent and straightforward process for customers to either enroll in or terminate their Prime membership.”
Amazon expressed concern about the FTC’s decision to launch this lawsuit without giving them prior notice. This happened while discussions with FTC staff were ongoing to clarify the specifics, context, and legal issues at hand and before any dialogue could occur with the commissioners themselves.
The announcement of this lawsuit coincided with Amazon’s reveal of the July dates for their major sales event, Prime Day.
The legal complaint suggests that despite considerable pressure from the FTC prompting Amazon to alter its cancellation process in April, alleged infringements continue. Consumers must reportedly navigate through five clicks on a desktop interface and six on a mobile platform to cancel their Amazon.com subscription.
The FTC’s ongoing investigation since March 2021 explores the sign-up and cancellation procedures of the Prime program.
The complaint indicated that consumers attempting to cancel their Prime membership faced a convoluted, multi-step process. The FTC report alleged that Amazon employed the term “Iliad Flow” to depict the process initiated in 2016, drawing parallels to Homer’s epic poem that narrates the drawn-out Trojan War.
The FTC also accused Amazon of “deliberate misconduct” by delaying the investigation and giving uncooperative responses to document requests.
Senior Analyst Evelyn Mitchell-Wolf from Insider Intelligence stated that the “FTC is making an example of Amazon, but it’s a common practice for companies to make account cancellation more challenging than creation.” Mitchell-Wolf further suggested that “Amazon’s market power could be a disadvantage in this case, as the FTC won’t struggle to demonstrate that consumers are indeed harmed if Amazon obstructs their capacity to opt-out of their Prime membership.”
On May 31, the FTC announced a $5.8 million settlement with Amazon’s Ring doorbell camera unit following allegations that some customers were being spied on. On the same day, the FTC reported that Amazon had agreed to a million settlement after allegations of violating children’s privacy rights for not deleting recordings made by the Alexa virtual assistant when requested by parents and retaining these recordings longer than necessary.
Tom Forte, Managing Director at D.A. Davidson Companies, pointed out that this recent lawsuit is symbolic of the global governmental efforts to curb the excessive influence of big tech firms, including Amazon, Apple, and Meta. Yet, he also noted other retailers and subscription services that similarly complicate the termination of memberships.
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