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FTC Accuses Amazon of Intentionally Deceiving Consumers with Prime Sign-up and Cancellation Process

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FTC Accuses Amazon of Intentionally Deceiving Consumers with Prime Sign-up and Cancellation Process

In a legal action taken on Wednesday, the Federal Trade Commission (FTC) filed a lawsuit against Amazon, accusing the prominent online retailer of deliberately deceiving millions of consumers. The allegations revolve around Amazon’s flagship Prime program, where it is claimed that the company intentionally misled customers into signing up for the service and then obstructed their efforts to cancel it. The FTC asserts that Amazon engaged in practices that undermined consumer rights and violated fair business practices.

According to the FTC, Amazon is accused of breaching the FTC Act and the Restore Online Shoppers’ Confidence Act by employing deceptive design strategies, commonly known as dark patterns. These tactics were allegedly used to manipulate users into unwittingly subscribing to Prime, bypassing their explicit consent. The agency contends that Amazon’s utilization of such practices served as a means to direct consumers towards enrollment in Prime without their informed and voluntary agreement.

FTC Chair Lina Khan stated, “Amazon deceived individuals by ensnaring them in recurring subscriptions without their consent, leading to user frustration and substantial financial losses.” At the time of this statement, there was no immediate response from Amazon representatives regarding the matter. The company’s shares experienced a decline of over 1% during morning trading.

Since March 2021, the FTC had been conducting an investigation into the sign-up and cancellation procedures associated with Amazon’s Prime program. Conflict arose between Amazon and the FTC when the agency requested CEO Andy Jassy and founder Jeff Bezos to provide testimonies regarding the company’s Prime practices. Amazon contended that the request would impose an unfair burden, a stance that the FTC dismissed.

Having been introduced in 2005, the Prime program has experienced remarkable growth, establishing itself as one of the most widely embraced subscription services worldwide. With a membership base exceeding 200 million globally, Prime has proven to be a significant revenue generator for Amazon, amounting to billions of dollars. For an annual fee of $139, subscribers gain access to a range of benefits such as free shipping and streaming content.

The legal action, lodged in the U.S. District Court for the Western District of Washington, alleges that Amazon’s leadership deliberately impeded or declined implementing modifications that could have simplified the Prime cancellation process. The lawsuit contends that these changes were rejected because they would have had a negative impact on Amazon’s financial performance and profitability.

According to the complaint, Amazon implemented practices that created challenges for consumers attempting to make purchases on its platform without subscribing to Prime. The complaint alleges that a button prompting users to finalize their transaction failed to adequately inform them that by doing so, they would also be enrolling in Prime for a recurring subscription. This lack of clarity in the process is highlighted as a point of concern in the complaint.

The FTC has accused Amazon of deliberately designing a convoluted cancellation process that discourages users from terminating their Prime subscription. According to the agency, Amazon internally referred to this process as “Iliad,” drawing inspiration from Homer’s epic poem about the Trojan War. The FTC’s claim is supported by a report from Insider.

This complaint represents the third lawsuit brought forth by the FTC against Amazon within the past month. In late May, Amazon reached a settlement with the agency, agreeing to pay over $30 million to resolve privacy-related cases involving its Alexa and Ring products. While Amazon expressed disagreement with the FTC’s allegations, it opted to settle in order to put the matter behind them and focus on the future.

About Rajesh Parmar

Rajesh Parmar

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