On Wednesday, the U.S. Federal Trade Commission accused Amazon.com (AMZN.O) of unwittingly enrolling millions of people in its paid Amazon Prime service and making it difficult to cancel.
The FTC sued Amazon in Seattle federal court, alleging that the company “knowingly duped millions of consumers into unknowingly enrolling in Amazon Prime.” Amazon called the FTC’s claims “false on the facts and law.”
Amazon used “manipulative, coercive or deceptive user-interface designs known as ‘dark patterns’ to trick consumers into enrolling in automatically renewing Prime subscriptions,” the FTC said.
The lawsuit is one of President Joe Biden’s efforts to curb Big Tech’s market dominance to protect consumers.
The FTC says Amazon Prime generates $25 billion annually. It offers fast, free shipping on millions of items, savings, and access to movies, music, TV series, and more.
Amazon’s sales depend on $139-a-year U.S. Prime users. Prime’s 200 million members power Amazon’s food delivery and streaming services.
“The truth is that customers love Prime,” Amazon said. “We make signing up for and canceling Prime easy by design.”
Amazon said, “it concerning that the FTC announced this lawsuit without notice to us, amid our discussions with FTC staff members to ensure they understand the facts, context, and legal issues, and before we were able to have a dialog with the commissioners themselves.”
Amazon’s July Prime Day announcement preceded Wednesday’s lawsuit. According to the lawsuit, Amazon changed its cancellation process in April under FTC pressure. However, “violations are ongoing” and “five clicks on desktop and six on mobile for consumers to cancel from Amazon.com.”
Amazon’s afternoon shares climbed 0.2%. Since March 2021, the FTC has been investigating Prime sign-up and cancellations.
The lawsuit claims Prime cancellation involved many difficult steps. The FTC likened Amazon’s 2016 “Iliad Flow” to Homer’s Trojan War epic.
The agency found Amazon’s “bad faith” responses to the FTC document demanded “intentional misconduct” to postpone the inquiry.
According to Insider Intelligence senior analyst Evelyn Mitchell-Wolf, 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 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 said.
On May 31, the FTC agreed to $5.8 million with Amazon’s Ring doorbell camera company for eavesdropping. Amazon agreed to pay $25 million to settle FTC accusations that it violated children’s privacy rights by failing to erase Alexa virtual assistant technology recordings at parents’ requests and keeping them longer than necessary.
D.A. Davidson Companies managing director Tom Forte termed the lawsuit “emblematic of efforts by governments across the globe to rein in the excess influence of big tech,” including Amazon, Apple, and Meta.
Forte highlighted several shops and subscription services that make membership cancellation difficult.