FTC Sues Amazon for Tricking Consumers

Amazon's headquarters in Seattle, Wash., on Nov. 13, 2018. Elaine Thompson/AP Photo

Just when Amazon finally settled its Federal Trade Commission (FTC) lawsuit over violating children’s privacy laws, the FTC has Amazon in its sights again. The FTC has announced two possible suits against the behemoth online retailer.

Amazon is under fire by the FTC for “deceptive designs” to convince consumers to enroll in Prime. The FTC is also preparing an unrelated anti-trust suit against Amazon. But what exactly is meant by deceptive designs?

Amazon Under Investigation for Violating ROSCA

In March 2021, Amazon, the sixth-largest company and the largest retailer worldwide, came under scrutiny from the FTC. It was looking into Amazon’s possibly violating the Restore Online Shoppers’ Confidence Act (ROSCA). ROSCA mandates clear payment terms in certain online shopping transactions.

The FTC wanted to know if this act was violated by Amazon automatically enrolling customers in the Prime subscription service without informed consent.

It also investigated Amazon’s mechanism for consumers stopping recurring charges when Prime or any other subscription service was purchased, either by accident or on purpose.

FTC Sues Amazon

On June 21, 2023, the FTC brought action under the ROSCA. In its complaint, it accuses Amazon of knowingly duping millions of consumers who unknowingly enrolled in its Amazon Prime subscription.

The FTC complaint states that “for years, Amazon used manipulative, coercive or deceptive user-interface designs known as ‘dark patterns’ to trick consumers into enrolling in automatically-renewing Prime subscriptions.”

Amazon Online Checkout Process Deceptive

The alleged deceptive interface usually occurs during the checkout process. Upon checkout, consumers were faced with numerous opportunities to subscribe to Prime.

The option to purchase items without subscribing was often difficult for consumers to locate. At times the button presented to consumers to complete the transaction didn’t clearly state that pressing it would sign the customer up for Prime. When accidentally choosing Prime, they were joining a recurring subscription.

Deceptive designs like these, which are meant to trick people into making choices that they might not make under different circumstances, are known as “dark patterns.”

The complaint states that Amazon executives were aware of consumers being nonconsensual enrolled using dark patterns. Amazon failed to take any meaningful steps to address the issue until they were aware of the FTC investigation.

The FTC claims that Amazon tried to delay and hinder its investigation multiple times. According to the FTC, Amazon committed “intentional misconduct” meant to delay the investigation by providing “bad faith” responses when documents were requested.

Amazon responded by saying that customers love Prime. Amazon said that “by design, we make it clear and simple for customers to both sign up for or cancel their Prime membership.” But was it easy or simple to cancel Prime membership?

Difficult to Cancel Prime

The FTC complaint also alleged that Amazon designed a cancellation process to deter consumers from successfully unsubscribing from Prime.

According to Amazon documents obtained by Insider, Amazon dragged out the ability to cancel a Prime membership under a project code-named “Illiad.” (The Illiad is a 500-page ancient Greek poem.)

Project Illiad created multiple levels of questions and new offers before a customer could cancel their Prime membership. The goal was to reduce churn.

And it worked; Prime cancellations dropped by 14 percent in 2017 when the program began.

But according to Jamil Ghani, vice president of Amazon Prime, in a statement, “We make it clear and simple for customers to both sign up for or cancel their Prime membership. We continually listen to customer feedback and look for ways to improve the customer experience”.

Since the FTC investigation began, Amazon has altered its cancelation labyrinth, but it still takes multiple clicks and confirmations.

In filing the suit, the FTC seeks civil penalties and a permanent injunction to prevent any future violations.

Prime Subscriptions Worth Billions to Amazon

According to the FTC, Amazon Prime is the largest subscription program worldwide. It generates $25 billion in revenue annually and has 200 million members worldwide. Annual revenue for Amazon in 2022 was $513.485 billion.

U.S. Prime members pay $139 yearly, which is up from last year’s $119. You can pay monthly at $14.99. Prime includes free, expedited shipping for purchases, video streams and other services.

Amazon had recently settled an FTC suit for $25 million for violating children’s privacy rights. It also had to pay a $5.8 million settlement for its Ring doorbell camera. The FTC said that Ring had been used for spying on customers.

FTC Action Has Broad Implications

The Amazon suit has broader implications for other consumer-facing retail business’s web-based marketing practices. Under FTC chair Lin Khan, other online retailers who use dark patterns will be scrutinized.

The FTC is concerned that consumer retention practices, like Amazon Prime’s, can be used as vehicles for certain big players, like digital platforms, to increase market dominance.

In 2022, bipartisan congressional lawmakers introduced legislation to ban dark pattern. But the bill failed to pass.

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