Amazon’s “Cancellation Trickery” for Prime Subscriptions Prompts FTC Suit
In an opening salvo against Amazon’s retail dominance, the Federal Trade Commission has sued the tech giant for allegedly duping consumers into signing up for its Prime service and then impeding them from canceling their subscriptions.
The heavily redacted lawsuit, filed Wednesday in Washington federal court, argues Amazon adopted a “manipulative” and “coercive” user interface to trick users into enrolling in automatically renewing subscriptions. The FTC says some people intended to sign up solely for Prime Video, which is a lower-cost option.
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Prime Video is included in the Amazon Prime membership, which costs $14.99 per month or $139 annually, though users can subscribe solely to the video service on its own for $8.99 monthly. The company ended last year with 168 million Prime members in the U.S., according to Consumer Intelligence Research Partners. Amazon doesn’t offer country-specific breakouts, but it’s said that there are more than 200 million Prime members worldwide. Subscription fees account for $25 billion of Amazon’s annual revenue, according to the complaint.
While the FTC hasn’t brought a sweeping antitrust suit against Amazon, like it has against Meta and Microsoft, it’s been looking into the company’s enrollment and cancellation processes for years. Last year, the agency ordered CEO Andy Jassy and founder Jeff Bezos to testify in a probe into whether Amazon deceives users into signing up and then makes it overly complicated to cancel.
“Amazon tricked and trapped people into recurring subscriptions without their consent, not only frustrating users but also costing them significant money,” said FTC Chair Lina Khan in a Wednesday press release.
Amazon disputed the allegations. “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,” said a company spokesperson in a statement to THR. “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.”
The suit, which attempts to chip away at Amazon’s retail dominance, details an intentionally “deceptive” design tactic on its website known as “dark patterns” to enroll consumers into Prime without consent. It faults the company for presenting to users numerous opportunities to subscribe to the program before they can place their order on the final checkout page. On desktop, consumers are presented with a prominent button to enroll in Prime and a “comparatively inconspicuous link” to decline, the suit alleges. On mobile, Amazon places the terms of Prime, like price and auto-renewal policies, at the very bottom of the page that’s not viewable unless users scroll down, according to the complaint.
Prime is considered a vital part of Amazon’s retail dominance because it keeps users locked into the company’s marketplace by offering them perks, including access to Prime Video.
Although it’s possible to sign up for Prime Video alone, the FTC says the company hides the option to upsell consumers into paying for the higher-priced alternative. “To enroll in Prime Video (instead of Prime), the consumer must click on the ‘Change’ button for the Plan information toward the top of the page, change the plan on the subsequent page, and then navigate back to confirm the Prime Video selection,” states the complaint.
The Wednesday announcement skewers the company for “cancellation trickery” and says, after enrolling users without their consent, Amazon is “sabotaging their attempts” to get out of the subscription. The suit details an intentionally labyrinthine cancellation process known inside the company as the “Iliad Flow,” first reported by Insider. This requires users intending to cancel their subscriptions to “navigate a four-page, six-click, fifteen-option cancellation process,” the FTC says. In contrast, customers could enroll in Prime with one or two clicks, according to the complaint.
“Consumers had to first locate the cancellation flow, which Amazon made difficult,” the suit states. “Once they located the cancellation flow, they were redirected to multiple pages that presented several offers to continue the subscription at a discounted price, to simply turn off the auto-renew feature, or to decide not to cancel.”
Additionally, the FTC takes issue with Amazon refusing to offer users the ability to cancel their subscriptions on the Prime Video application or on the Amazon FireStick.
Amazon revamped its cancellation process for some subscribers after it was notified of the FTC investigation, according to the suit.
The complaint alleges violations of section 5 of the FTC Act, which prohibits unfair or deceptive acts in commerce, and the Restore Online Shoppers’ Confidence Act, which bars the sale of goods or services on the internet in which a consumer’s failure to reject an offer is considered consent to be charged. The agency has been cracking down on companies that impede users’ efforts to cancel a service.
“The FTC will continue to vigorously protect Americans from ‘dark patterns’ and other unfair or deceptive practices in digital markets,” Khan said in a statement.
Khan, who previously worked as an advisor to FTC commissioner Rohit Chopra, rose to prominence in 2017 when she challenged the current antitrust framework’s failure to accurately recognize anticompetitive behavior in an article for the Yale Law Journal titled “Amazon’s Antitrust Paradox.”
“Amazon is the titan of twenty-first century commerce,” she wrote. “In addition to being a retailer, it is now a marketing platform, a delivery and logistics network, a payment service, a credit lender, an auction house, a major book publisher, a producer of television and films, a fashion designer, a hardware manufacturer, and a leading host of cloud server space.”
Last year, Amazon closed its $8.5 billion acquisition of MGM. The landmark deal augmented the tech giant’s entertainment arsenal as it expanded Amazon Studios.
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