FTC sues Amazon for allegedly tricking millions of users into Prime subscriptions

The company avoided fixes that would have hurt its bottom line, agency claims.

June 21, 2023, 2:03 PM

The Federal Trade Commission sued Amazon on Wednesday for allegedly using deceitful tactics in a years-long effort to trick millions of customers into enrolling in its Prime subscription service, the agency said.

The company also made it more complicated for customers to cancel their subscription membership in an effort to enhance sales, according to the FTC complaint.

The suit, filed in the Western District of Washington, alleged that certain Amazon executives took part in making it harder for consumers to opt out of renewing or signing up for their Prime subscriptions "because those changes would also negatively affect Amazon's bottom line."

"Amazon tricked and trapped people into recurring subscriptions without their consent, not only frustrating users but also costing them significant money," FTC Chair Lina Khan said in a statement on Wednesday.

"These manipulative tactics harm consumers and law-abiding businesses alike," Khan added.

The heavily redacted complaint alleges that Amazon violated several laws, including deploying marketing tactics known as "dark patterns," which manipulate consumers into unknowingly making purchases or sharing user data, the FTC alleged.

In a statement provided to ABC News, Amazon called the FTC's claims "false on the facts and the law. The truth is that customers love Prime, and by design we make it clear and simple for customers to both sign up for or cancel their Prime membership. As with all our products and services, we continually listen to customer feedback and look for ways to improve the customer experience, and we look forward to the facts becoming clear as this case plays out."

Amazon's response also said the FTC "announced this lawsuit without notice to us, in the midst of 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 before they filed a lawsuit."

"While the absence of that normal course engagement is extremely disappointing, we look forward to proving our case in court,” Amazon's statement concluded.

Prime Membership, according to the FTC, amounts to $25 billion of Amazon's annual revenue. Company leadership "slowed, avoided, and even undid" changes to the membership interface that it knew would negatively affect sales, the complaint said.

In recent months, however, the company changed its subscription cancellation process in response to "substantial pressure" from the FTC, the legal complaint said.

PHOTO: FILE - Lina Khan, Federal Trade Commission (FTC) chair in Washington, D.C., April 21, 2021.
Lina Khan, Federal Trade Commission (FTC) chair in Washington, D.C., April 21, 2021.
Graeme Jennings/Washington Examiner/Bloomberg via Getty Images, FILE

The FTC released a report in September sounding an alarm about a rise in the use of dark patterns by companies across the digital economy.

In 2021, the agency released a warning that it would ramp up enforcement of violations tied to the use of dark patterns in response to a "rising number of complaints."

The lawsuit on Wednesday marks the third action taken by the FTC against Amazon this year. Last month, Amazon agreed to pay $25 million to settle FTC allegations that the company's Alexa smart home device illegally collected data on children.

The FTC lawsuit adds to a series of recent setbacks for Amazon, including a wave of layoffs that slashed 18,000 jobs, as well as the delayed opening of a second headquarters in Virginia, known as "HQ2."

Sales at top tech firms have retreated from the blistering pace attained during the pandemic, when billions across the world were forced into isolation and came to rely more on services like e-commerce delivery.

Still, shares of Amazon have surged nearly 50% this year, owing in part to a tech sector rally amid enthusiasm about artificial intelligence.

Amazon's stock value fell roughly half a percentage point in early trading on Wednesday.

Related Topics