FTC Challenges Amazon’s Prime Subscription Practices

The Federal Trade Commission (“FTC”) has filed a complaint against Amazon.com, Inc. (“Amazon”), asserting that the online retail giant “knowingly duped millions of consumers into unknowingly enrolling in its Amazon Prime service.” Specifically, the FTC alleges that Amazon has used “dark patterns” to trick consumers into enrolling in automatically-renewing Prime subscriptions, and made it incredibly difficult for consumers to cancel those subscriptions.

The complaint, filed in the District Court for the Western District of Washington on June 21, 2023, is heavily redacted. However, in its press release announcing the complaint, the FTC noted that it has informed the Court that it “does not find the need for ongoing secrecy compelling.” Even with the redactions, the allegations contained within the complaint are clear. The FTC claims that the “nonconsensual enrollment problem” was well known within Amazon. Moreover, it alleges that some Amazon employees raised this issue with Amazon executives, but that those Amazon executives “slowed, avoided, and even undid user experience changes that they knew would reduce nonconsensual enrollment” because those changes would negatively impact Amazon’s revenue.

Among other things, the FTC takes issue with Prime’s cancellation process, noting that Amazon used the term “Iliad” to describe the process, which media reporting has said is a reference to Homer’s poem set over 24 books and nearly 16,000 lines about the decades long Trojan War. Specifically, the FTC states that Amazon’s “Iliad Flow” required consumers seeking to cancel their Prime subscription to “navigate a four-page, six-click, fifteen-option cancellation process.” Contrastingly, it would take only one or two clicks for consumers to enroll in Prime. According to the FTC, Amazon introduced the Iliad Flow in 2016, and it did not make any significant changes in the United States until April 2023, after the company had received pressure from the FTC to make such changes and shortly before the complaint was filed.

The FTC is seeking unspecified civil penalties, and notably alleges that Prime subscription fees account for $25 billion of Amazon’s annual revenue.

TAKEAWAY: As evidenced by this significant lawsuit, the FTC is continuing to take aim at perceived “dark patterns,” particularly in the automatic renewal context. This complaint should serve as a reminder to subscriber-based companies to ensure compliance with automatic renewal and cancellation laws and regulations. We will continue to monitor the FTC’s lawsuit against Amazon.

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