FTC files lawsuit against Amazon for Prime subscription

Jun 22, 2023, 9:42 AM UTC
3 mins read
FTC files lawsuit against Amazon for Prime subscription
(Photo by Jens Mahnke/Pexels)

The U.S. Federal Trade Commission (FTC) has filed a lawsuit against e-commerce giant Amazon, accusing the company of enrolling millions of consumers into its paid subscription service, Amazon Prime, without their consent. Additionally, the FTC claims that Amazon has made it challenging for customers to cancel their subscriptions. This lawsuit is part of the Biden administration’s broader efforts to curb the market dominance of Big Tech companies and promote competition to safeguard consumer interests.

The FTC claims that Amazon employed manipulative and deceptive user-interface designs, referred to as “dark patterns,” to trick consumers into unknowingly enrolling in Amazon Prime’s automatically renewing subscriptions. By using these tactics, Amazon purportedly violated consumer protection laws. The FTC seeks civil penalties and a permanent injunction to prevent future violations by the e-commerce giant.

Amazon Prime, the world’s largest subscription program, generates a staggering $25 billion in revenue annually. The service offers an array of benefits, including fast and free shipping on millions of items, exclusive discounts, and access to movies, music, and TV series, among other perks. With over 200 million members worldwide, Prime plays a crucial role in driving Amazon’s sales volume and supporting its additional ventures, such as Prime Video streaming and grocery delivery services.

In response to the lawsuit, Amazon vehemently denied the FTC’s claims, stating that they are false both in terms of facts and the law. The company emphasized that it prioritizes clarity and simplicity in the sign-up and cancellation processes for Prime memberships. Amazon expressed concern over the FTC’s decision to file the lawsuit without prior notice, particularly while the company was engaged in discussions with FTC staff members to provide necessary context and resolve any issues.

According to the FTC’s complaint, consumers attempting to cancel their Prime memberships encountered a convoluted and labyrinthine process. The FTC alleged that Amazon intentionally designed a multi-step procedure, referred to as “Iliad Flow,” that created significant obstacles for consumers seeking to cancel their subscriptions. Even though Amazon modified its cancellation process in April, the FTC contends that violations persist, with cancellation still requiring five clicks on desktop and six on mobile devices.

The FTC has been investigating Amazon’s Prime sign-up and cancellation processes since March 2021. The agency asserts that Amazon deliberately engaged in misconduct by providing obstructive and “bad faith” responses to document requests, thereby hindering the progress of the investigation.

Evelyn Mitchell-Wolf, a senior analyst at Insider Intelligence, believes that Amazon’s market power may work against the company in this case. Mitchell-Wolf suggests that the FTC will have little difficulty demonstrating harm caused to consumers if Amazon obstructs their ability to cancel their Prime memberships. This legal action against Amazon is part of a broader global trend of governments seeking to curtail the influence of major tech companies like Amazon, Apple, and Meta.

While the FTC’s lawsuit highlights Amazon’s practices, it is worth noting that other retailers and subscription services also employ similar tactics to make it challenging for consumers to cancel their memberships. Tom Forte, managing director at D.A. Davidson Companies, suggests that this lawsuit signifies a broader effort to rein in the excessive influence of big tech companies and subscription services across the globe.

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