FTC Sues Amazon Alleging Deceptive Marketing Tactics for Prime Subscriptions
The Federal Trade Commission (FTC) yesterday filed a civil case against Amazon alleging that the company used “manipulative, coercive, or deceptive user-interface designs known as ‘dark patterns’ to trick consumers into enrolling in automatically renewing Prime subscriptions.” This case continues a pattern initiated by FTC Chair Lina Khan of challenging web-based marketing tactics of consumer-facing businesses as deceptive and anticompetitive on the grounds that they impede consumer choice and can be used by dominant firms as a tactic to exclude competitors.
In a statement, Amazon rejected the factual and legal premises underlying the complaint and emphasized the incredible popularity of Prime. As Politico reported, “[t]he company also said it was given no notice of the lawsuit, was still discussing the investigation with FTC staff, and did not have the opportunity to make its case to the agency’s three commissioners.” The absence of that normal course of engagement is a troubling departure from routine Commission practices.
The allegations in the new FTC complaint focus on charging of consumers without consent, inadequate disclosures, nonconsensual enrollment in Amazon’s Prime services, and failure to provide a simple cancellation mechanism. According to the complaint, Amazon’s checkout process affords several opportunities to join Prime before consumers place their order on the final checkout page. The FTC claims that the page displays a prominent button to enroll in Prime and a comparatively inconspicuous link to decline. These opportunities, the complaint alleges, emphasize “free shipping” or “free trial” while minimizing or failing to include adequate information about the cost of Prime.
Similarly, when customers try to enroll in Amazon Prime Video, they are still prompted to enroll in Prime and must select the option to change their plan in order to select the lower-cost Prime Video option. By contrast, the FTC alleges that the process for canceling Prime is cumbersome, and it cites internal Amazon documents describing the process as the “Iliad flow,” after the lengthy Greek epic poem, because the cancellation option allegedly requires users to click through multiple pages in order to avoid certain options that stop them from canceling their membership.
This action by the FTC contains broader implications for web-based marketing practices of other consumer-facing retail businesses. Many of these businesses, such as payment applications and “buy now/pay later” installment plans, are in the consumer financial services sector, which has been an increasing focus of the FTC under Chair Khan. In 2022, the FTC warned digital businesses that employ “dark patterns” that these practices can serve to weaken competition and that the FTC would continue to scrutinize them.
This most recent case further demonstrates the FTC’s concern that consumer retention practices, such as those challenged in the Amazon Prime case, can be used as vehicles to enhance the market dominance of certain big players, especially in digital platforms. Consumer-facing companies that operate or use these platforms should be attuned to this growing trend of regulatory enforcement based on a pro-competition, pro-consumer rationale.
The authors express their thanks for the efforts of Law Clerk Elizabeth Lilly in the preparation of this alert.
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