The Federal Trade Commission (FTC) filed a lawsuit against Amazon on Wednesday, alleging that the company employed deceptive tactics to manipulate customers into signing up for its Prime service and made it difficult for them to cancel their subscriptions. Lina Khan, the chair of the FTC, spearheaded this aggressive action against Amazon, marking a significant move against the e-commerce giant.
According to the FTC, Amazon utilized “dark patterns,” manipulative and coercive design tactics on its website, to dupe millions of consumers into enrolling in Prime without their informed consent. When customers wanted to cancel their subscriptions, Amazon intentionally complicated the process with complex procedures. The agency argues that Amazon’s actions not only frustrated users but also resulted in substantial financial losses for them.
In response, Amazon released a statement denying the FTC’s claims, asserting that their sign-up and cancellation processes are clear and simple for customers. The company accused the FTC of filing the lawsuit without prior notice while both parties were still in discussions about the case.
The lawsuit, filed in the U.S. District Court for the Western District of Washington, targets Amazon’s Prime program, which is an integral part of the lives of over 200 million customers. Prime members pay an annual fee of $139 for benefits such as faster shipping, streaming movies and series, and discounts at Whole Foods. Over time, Amazon has added more perks to the Prime membership, including live sports, and has raised the subscription fee.
This legal action by the FTC represents the agency’s first move against Amazon under the leadership of Lina Khan, who gained fame for her viral critique of the company. Khan advocates for a more aggressive approach to regulatory oversight of big tech companies, recognizing the significant influence they wield over online commerce.
While the FTC’s Bureau of Competition has been investigating Amazon’s practices for years, it has yet to bring a comprehensive antitrust case against the company. Stakeholders are closely observing how Khan will proceed with the findings.
Amazon has recently settled with the FTC in previous cases that pre-date Khan’s tenure. Last month, the company agreed to pay $25 million to settle allegations that its Alexa devices illegally collected children’s data. Amazon also settled another privacy case with the FTC concerning its Ring home security subsidiary.
This lawsuit against Amazon is part of a broader campaign by regulators to curb the power of major tech giants like Amazon, Apple, Google, Microsoft, and Meta. The Department of Justice has filed multiple antitrust cases against Google in recent years, while European regulators have implemented privacy laws and pursued charges against major tech companies.
Prime has long been a draw for customers due to its wide range of benefits, contributing to Amazon’s dominance in the market. Launched in 2005 for $79 annually, the program has evolved over time with the addition of streaming services and a price increase to $139 per year in 2022. In 2021, Amazon reported having over 200 million Prime members, with customers spending $35 billion on subscriptions.
The FTC alleges that Amazon made it challenging to make a purchase without subscribing to Prime during the checkout process. The company utilized techniques such as repetition and color to divert customers’ attention to the promise of free shipping rather than the subscription price, leading to subscriptions without informed consent.
Additionally, Amazon made it difficult for customers to find the cancellation page, bombarding them with offers designed to persuade them to change their minds. The lawsuit highlights Amazon’s use of the name “Iliad,” from the Greek epic poem recounting the Trojan War, to describe its Prime cancellation process, which the FTC argues was deliberately obstructive.
The FTC is seeking a court order to prevent Amazon from engaging in these practices and requesting an unspecified financial penalty.
Concerns about the difficulty of canceling Prime have grown in recent years, leading to a complaint filed by the Electronic Privacy Information Center in 2021. The advocacy group accused Amazon of employing manipulative designs to frustrate users attempting to cancel their Prime subscriptions.
The FTC has taken a stand against these design practices and pledged to crack down on them, recognizing the need for increased attention and enforcement in this area.
Critics view Prime as a pivotal component of Amazon’s business strategy, as it fosters customer loyalty and lets Amazon cross-promote its other offerings, such as exclusive streaming content. Amazon has argued against changes to antitrust laws focused on tech giants, stating that such changes would undermine Prime.
Lina Khan’s approach to Amazon will be closely monitored, given her prominent role in reshaping the modern interpretation of antitrust law to tackle companies like Amazon. She gained recognition for publishing an article in The Yale Law Journal in 2017, urging a reinterpretation of antitrust doctrine to address the dominance of tech companies like Amazon, reflecting the need for heightened scrutiny in this rapidly evolving market environment.
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