Amazon duped millions of people into enrolling in Prime: US FTC

The United States Federal Trade Commission has accused Amazon.com of enrolling millions of consumers into its paid subscription Amazon Prime service without their consent and making it hard for them to cancel, the latest action by the agency against the e-commerce giant in recent weeks.

The Federal Trade Commission (FTC) sued Amazon in federal court in Seattle on Wednesday, alleging that “Amazon has knowingly duped millions of consumers into unknowingly enrolling in Amazon Prime”. The FTC said Amazon used “manipulative, coercive or deceptive user-interface designs known as ‘dark patterns’ to trick consumers into enrolling in automatically renewing Prime subscriptions”.

In a statement, Amazon called the FTC’s claims “false on the facts and the law”.

The lawsuit is one of several actions taken by President Joe Biden’s administration intended to rein in the outsized market power of Big Tech firms as it tries to increase competition to create greater consumer protection.

The FTC said Amazon Prime is the world’s largest subscription programme, generating $25bn in revenue annually. It offers fast, free shipping on millions of items, various discounts, access to movies, music and television series, as well as other benefits. Prime members in the US pay $139 per year and drive much of Amazon’s sales volume. Prime has more than 200 million members worldwide.

The FTC said that “one of Amazon’s primary business goals – and the primary business goal of Prime – is increasing subscriber numbers”.

The lawsuit said that under substantial pressure from the FTC, Amazon changed its cancellation process in April but that “violations are ongoing” and that it still “requires five clicks on desktop and six on mobile for consumers to cancel from Amazon.com”.

The agency is seeking civil penalties and a permanent injunction to prevent future violations.

Amazon’s shares were down 0.9 percent in midday trading.

The FTC has been investigating sign-up and cancellation processes for the Prime programme since March 2021.

“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 statement.

Consumers who attempted to cancel Prime were faced with multiple labyrinthine steps to accomplish the task of cancelling, according to the complaint. The FTC complaint said Amazon used the term “Iliad Flow” to describe the process it began in 2016, referencing Homer’s epic poem about the lengthy Trojan War.

Amazon also committed “intentional misconduct” meant to delay the FTC’s investigation by providing “bad faith” responses to requests for documents, the agency said.

In its statement, Amazon said, “The truth is that customers love Prime, and by design, we make it clear and simple for customers to both sign up for or cancel their Prime membership.”

Amazon added it finds it “concerning that the FTC announced this lawsuit without notice to us, 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”.

‘Making an example’

Insider Intelligence senior analyst Evelyn Mitchell-Wolf said that the “FTC is making an example of Amazon, but it’s quite common for companies to make it more difficult to cancel an account than it is to create one”.

“Amazon’s market power might work against it in this instance, as the FTC won’t have a hard time proving that consumers are, indeed, harmed if Amazon impedes their ability to exercise their choice to cancel their Prime membership,” Mitchell-Wolf added.

The FTC, on May 31, announced a $5.8m settlement with Amazon’s Ring doorbell camera unit after the agency said cameras had been used for spying on some customers. On the same day, the FTC said Amazon agreed to pay $25m to settle allegations that it violated children’s privacy rights by failing to delete Alexa virtual assistant technology recordings at the request of parents and keeping them longer than necessary.

The new lawsuit is “emblematic of efforts by governments across the globe to rein in the excess influence of big tech”, including Amazon, Apple and Meta, according to Tom Forte, managing director at D A Davidson Companies.

But Forte also questioned the FTC’s strategy, pointing to other retailers and subscription services that make it difficult to end memberships.