Yesterday, Amazon failed to convince a US district court to dismiss the Federal Trade Commission’s lawsuit targeting the tech giant’s alleged history of tricking people into signing up for Prime.
The FTC has alleged that Amazon “tricked, coerced, and manipulated consumers into subscribing to Amazon Prime,” a court order said, failing to get informed consent by designing a murky sign-up process. And to keep subscriptions high, Amazon also “did not provide simple mechanisms for these subscribers to cancel their Prime memberships,” the FTC alleged. Instead, Amazon forced “consumers intending to cancel to navigate a four-page, six-click, fifteen-option cancellation process.”
In their motion to dismiss, Amazon outright disputed these characterizations of its business, insisting its enrollment process was clear, its cancellation process was simple, and none of its executives could be held responsible for failing to fix these processes when “accidental” sign-ups became widespread. Amazon defended its current practices, arguing that some of its Prime disclosures “align with practices that the FTC encourages in its guidance documents.”
But the judge apparently did not find Amazon’s denials completely persuasive. Viewing the FTC’s complaint “in the light most favorable to the FTC,” Judge John Chun concluded that “the allegations sufficiently indicate that Amazon had actual or constructive knowledge that its Prime sign-up and cancellation flows were misleading consumers.”
In his order, Chun also denied individual motions to dismiss from Amazon executives Russell Grandinetti, Neil Lindsay, and Jamil Ghani, who oversaw Prime operations.
Executives had urged the court to dismiss the FTC’s claims against them. They argued that the FTC “singled them out ‘for an ‘unprecedented sanction'” when the agency had “only recently started prosecuting companies for using ‘dark patterns'” under Restore Online Shoppers’ Confidence Act (ROSCA) and the FTC Act. They claimed that the FTC never alerted them to any wrongdoing before filing the lawsuit, so how could they have known they were violating the law?
According to Chun, however, the FTC sufficiently alleged that each of these executives knew they were violating consumer protection laws when prioritizing profits over eliminating dark patterns triggering “accidental” or “nonconsensual” Prime sign-ups.
Chun explained that executives may be “personally liable for corporate violations of the FTC Act if the individual ‘participated directly in, or had the authority to control, the unlawful acts or practices at issue.'”
For example, when Lindsay—who in 2016 had the “most responsibility for the Prime subscription program”—was “asked about Amazon’s use of dark patterns during the Prime enrollment process,” Lindsay justified the dark patterns.
“Lindsay explained that once consumers become Prime members—even unknowingly—they will see what a great program it is and remain members, so Amazon is ‘okay’ with the situation,” Chun’s order said.
And when Grandinetti, who “oversaw the Prime subscription program” in 2018, was told that the sign-up process and auto-renew feature frustrated customers, he “vetoed any changes that would reduce enrollment.”
Because executives seemingly prioritized profits over reducing customer friction, the FTC alleged that reasonable customers got sucked into Prime without their consent. Sometimes customers understandably got confused by the “discrepancy in size, location, and color” of Amazon’s disclosures, Chun suggested. Other times, confusion struck when Amazon tried to upsell customers on Prime at checkout—pairing their enrollment with their other shopping experience.
One such trick that Chun called out saw Amazon offering two-day free shipping with the click of a button at checkout that also signed customers up for Prime even if they didn’t complete the purchase.
“With the offer of Amazon Prime for the purpose of free shipping, reasonable consumers could assume that they would not proceed with signing up for Prime unless they also placed their order,” Chun said, ultimately rejecting Amazon’s claims that all of its “disclosures would be clear and conspicuous to any reasonable consumer.”
Responding to Chun’s order, an Amazon spokesperson told Ars that Amazon denies the FTC’s allegations as false.
“The FTC’s claims are false on the facts and the law,” Amazon’s spokesperson told Ars. “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 opportunity to present the real facts in the case.”
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