FTC Sues Amazon Over Deceptive Practices Involving Prime

The Federal Trade Commission has filed suit against Amazon, alleging the e-commerce giant surreptitiously enrolled millions of people in the $139 per year Amazon Prime program, and once subscribed made it difficult for them to cancel. “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, citing “deceptive user-interface designs known as ‘dark patterns’ to trick consumers into enrolling in automatically renewing Prime subscriptions.”

Such practices violate both the FTC Act and the Restore Online Shoppers’ Confidence Act (ROSCA), according to the FTC.

Filed in U.S. district court in Seattle, the complaint is heavily redacted, although “the FTC has told the Court it does not find the need for ongoing secrecy compelling,” according to the agency’s statement, which suggests Amazon may soon find itself fighting to keep its trade secrets (or alleged indiscretions) hidden.

Khan, who was nominated to run the FTC by President Biden and assumed the role in 2021, drew attention with a 2017 article in the Yale Law Journal  titled “Amazon’s Antitrust Paradox.”

Between this Amazon suit and the two filed against Microsoft to thwart its purchase of Activision Blizzard (one began trial yesterday, the other was filed this month), Khan is earning a reputation as an aggressive combatant with sights trained across the ideological spectrum.

Amazon Prime currently has more than 200 million worldwide members, according to The Wall Street Journal, which says the program “has helped Amazon become an integral part of many American households’ shopping habits.” It’s a habit the government alleges is difficult to kick.

“For years, Amazon made it easy to enroll in Prime with one or two clicks, but created a ‘four-page, six-click, fifteen-option cancellation process’ known internally as ‘the Iliad Flow,’ the FTC said, in an apparent reference to Homer’s epic about the Trojan War,” WSJ writes, adding that “the agency said the ‘labyrinthine’ procedure was designed to make it cumbersome and confusing for customers to cancel Prime.”

Amazon denies the government’s charges and says it looks forward to proving its case in court. The company settled an earlier enforcement action under Khan, agreeing in May to pay $30.8 million against charges it improperly saved children’s Alexa voice recordings and let employees surveil customers using its Ring video doorbell units.

Last year, Vonage paid a $100 million settlement against FTC claims that it imposed obstacles that made it difficult for customers to cancel the VoIP telephone service, which was also accused of charging unexplained termination fees.

While the FTC Act (which dates to 1914 and was signed by Woodrow Wilson) gives the agency power to investigate and prosecute cases on behalf of the government, ROSCA was enacted in 2011 and is specific to e-commerce, containing consumer disclosure requirements for material terms of online transactions.

Canceling a Digital Subscription Is Hard. That’s Changing, The Wall Street Journal, 6/22/23

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