Amazon tricked millions of consumers into signing up for Prime, US FTC says

WASHINGTON, June 21 (Reuters) – The U.S. Trade Commission accused ( AMZN.O ) on Wednesday of signing up millions of consumers to its paid subscription Amazon Prime service without their consent and making it difficult for them to cancel, saying the agency. latest action against the online shopping giant in recent weeks.

The FTC sued Amazon in federal court in Seattle, alleging that the company “deliberately deceived millions of consumers into unwittingly signing up for Amazon Prime.” In a statement, Amazon called the FTC’s allegations “false on fact and law.”

Amazon has used “manipulative, coercive or deceptive user interface designs known as ‘dark patterns’ to trick consumers into signing up for automatic renewal of Prime subscriptions,” the FTC said as it seeks civil penalties and a permanent injunction to prevent future break.

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 they try to increase competition to protect consumers.

The FTC said Amazon Prime is the world’s largest subscription program, generating $25 billion in revenue annually. It offers fast, free shipping on millions of items, various discounts and access to movies, music and TV shows, as well as other benefits.

Prime members in the US pay $139 per year and drive much of Amazon’s sales volume. Prime, which has more than 200 million members worldwide, is critical to Amazon’s other businesses, including its Prime Video streaming service and its grocery delivery service.

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

Amazon added that it finds “it troubling that the FTC announced this lawsuit without notice to us, in the midst of our discussions with FTC staff to ensure they understand the facts, context and legal issues, and before we were able to have a dialogue with the commissioners themselves.”

Wednesday’s lawsuit came on the day Amazon announced the July dates for its big Prime Day sales event.

An Amazon Prime truck is pictured crossing the George Washington Bridge on Interstate Route 95 during Amazon’s two-day “Prime Early Access Sale” shopping event for Amazon members in New York City, New York, U.S., October 11, 2022. REUTERS/ Mike Cool

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

Amazon shares rose 0.2% in afternoon trade.

The FTC has been investigating enrollment and cancellation processes for the Prime program since March 2021.

Consumers who attempted to cancel Prime were faced with several labyrinthine steps to complete the task of canceling, according to the complaint. The FTC complaint said Amazon used the term “Iliad Flow” to describe the process it started in 2016, referencing Homer’s epic poem about the long-running Trojan War.

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

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

“Amazon’s market power may work against it in this case, as the FTC will have no difficulty proving that consumers are actually harmed if Amazon impedes their ability to exercise the choice to cancel their Prime membership,” Mitchell-Wolf added.

On May 31, the FTC announced a $5.8 million settlement with Amazon’s Ring doorbell camera unit after the agency said cameras had been used to spy on some customers. The same day, the FTC said Amazon agreed to pay $25 million 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 retaining them longer than necessary.

The new lawsuit is “emblematic of efforts by governments around the world to rein in the excess influence of big tech,” including Amazon, Apple and Meta, according to Tom Forte, CEO of DA Davidson Companies.

But Forte also pointed to other retailers and subscription services that make it difficult to terminate memberships.

Reporting by David Shepardson and Chris Sanders in Washington; Additional reporting by Arriana McLymore; Editing by Will Dunham

Our standards: Thomson Reuters Trust Principles.

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