Amazon Accused of Tricking Customers into Prime, Faces Trial
A federal trial commencing this week in Amazon’s hometown will scrutinize allegations that the online retailing behemoth deceived customers into enrolling in its Prime service and created obstacles for cancellation thereafter. The Federal Trade Commission filed a lawsuit against Amazon in US District Court in Seattle two years ago, alleging over a decade of legal violations, including breaches of the Restore Online Shoppers’ Confidence Act, a 2010 law aimed at ensuring consumers are aware of online charges. Jury selection commenced on Monday, with opening statements set to follow.
Prime offers subscribers a range of benefits, including expedited shipping, access to video streaming, and discounts at Whole Foods, all for an annual fee of $139 or a monthly fee of $14.99. It represents a crucial and expanding segment of Amazon’s operations, boasting over 200 million members. In its latest quarterly report, the company in July announced net revenue exceeding $12 billion for subscription services, reflecting a 12% increase compared to the same period last year. The figure encompasses both annual and monthly fees linked to Prime memberships, in addition to other subscription services like its music and e-books platforms. The company stated that it provides a clear explanation of Prime’s terms prior to charging customers, and that it offers straightforward methods for canceling membership, including options by phone, online, and via online chat.
Amazon acknowledged in a trial brief filed last week that occasional customer frustrations and mistakes are inevitable, particularly for a program as popular as Amazon Prime. The fact that a small percentage of customers may have misunderstood Prime enrollment or cancellation does not establish that Amazon breached the law. However, the FTC stated that Amazon intentionally complicated the purchasing process for customers, making it challenging to buy an item without also signing up for Prime. The agency reported that in certain instances, consumers encountered a button to finalize their transactions that did not explicitly indicate it would also enroll them in Prime. The FTC stated in its trial brief that Amazon has long been aware that millions of its customers faced difficulties with both the enrollment and cancellation processes of its subscription service, Prime. Millions of consumers found themselves enrolled in Prime without their knowledge or consent, yet Amazon has declined to address this acknowledged issue, which employees have referred to internally as a ‘unspoken cancer,’ as any clarity adjustments could result in a decline in subscribers.
The complaint stated that exiting a subscription was frequently overly complex, and that Amazon leadership hindered or dismissed modifications that could have simplified the cancellation process. Internally, Amazon referred to the process as Iliad, drawing inspiration from the ancient Greek poem that chronicles the protracted siege of Troy during the Trojan war. The procedure necessitates that the customer confirm their intention to cancel membership across three pages. US District Judge John Chun, appointed by former President Joe Biden, issued an order last week affirming that the Restore Online Customers’ Confidence Act applies to Prime. He also restricted certain legal defenses that Amazon may present at trial and aligned with the FTC regarding its assertion that Amazon breached the law by obtaining customers’ billing information prior to revealing the terms of Prime. However, Chun noted that several additional issues are still pending for the jury’s consideration, such as whether Amazon’s disclosures regarding the material terms of Prime membership are clear and conspicuous, and whether the cancellation method for Illiad is straightforward, as mandated by law. Chun also ruled that two Amazon executives named as individual defendants, Neil Lindsay and Jamil Ghani, were so entwined with the Prime program that they will personally face liability if the jury sides with the FTC. A third individual, Russell Grandinetti, may also be subject to personal liability if the jury reaches that conclusion.
Amazon issued a statement on Monday: “The bottom line is that neither Amazon nor the individual defendants did anything wrong. We remain confident that the facts will show these executives acted properly, and we always put customers first.” The FTC, which declined to comment Monday, initiated its investigation into Amazon’s Prime subscription practices in 2021 during the first Trump administration. However, the lawsuit was filed in 2023 under former FTC Chair Lina Khan, an antitrust expert appointed by Biden. The agency initiated the case several months prior to filing an antitrust lawsuit against the retail and technology company, alleging that it possesses monopolistic control over online markets. In July, Chun criticized Amazon for withholding 70,000 documents from the FTC, including those incorrectly labeled as containing internal legal advice, asserting that such behavior amounted to bad faith. Meanwhile, similar to other tech companies, Amazon has been striving to establish more amicable relations with President Donald Trump, who consistently criticized the company throughout his first term.
In December, Amazon contributed $1 million to Trump’s inauguration fund. Jeff Bezos, the founder of Amazon, attended the inauguration alongside other prominent tech leaders. Earlier this year, Amazon’s Prime Video service commenced streaming The Apprentice, the long-running TV show that elevated Trump’s profile prior to his presidential campaign. The company is currently developing a documentary that provides an unparalleled behind-the-scenes glimpse into the life of first lady Melania Trump.
