Amazon Trial Opens as FTC Accuses Company of Deceptive Prime Practices

Amazon knew millions of customers were unintentionally signing up for Prime membership but did not stop the practice because it would have affected revenue, US Federal Trade Commission (FTC) attorneys argued as an antitrust case began.

 

The civil case against Amazon and three of its executives is a key test of the FTC’s tough-on-tech stance and could force the company to pay damages worth hundreds of millions of dollars, plus fines of up to $53,000 per violation. It could also damage the reputation of a company that markets itself as being obsessed with making customers’ lives easier.

 

Amazon deliberately simplified the Prime membership sign-up and cancellation processes but opted not to make them easier to cancel, “because to Amazon, nothing about Prime matters more than the number of members, whether those members want to be members or not,” FTC attorney Jonathan Cohen told jurors during opening statements. “More members, more money,” he repeated several times while presenting the government’s case in the federal courthouse near the Seattle-based company’s headquarters.

 

Amazon lawyer Moez Kaba denied any wrongdoing by the company or its executives, insisting that Prime’s terms were clearly disclosed and cancellation was straightforward.

 

Kaba accused the FTC of selectively presenting evidence to portray Amazon as deliberately duping customers into signing up for the auto-renewing membership.

 

The case forms part of a bipartisan crackdown on what the FTC describes as deceptive subscription practices. The agency began probing Amazon’s subscription practices during President Donald Trump’s first term, and the case was filed during Joe Biden’s presidency.

 

In recent months, the FTC has also taken action against other companies: in April, it sued Uber over allegedly deceptive marketing of its Uber One subscription, and in August, it sued the operators of the LA Fitness gym chain for burdensome membership cancellation requirements.

 

Prime subscribers pay up to $14.99 per month for benefits including free expedited shipping and access to Amazon’s streaming video service. While this may seem minor to some, for others it “could mean grocery money for a family, fuel for a car, or the last bit of money to cover rent,” an Amazon employee wrote in a 2020 email to one of the executives charged in the case.

 

Amazon attracts new subscribers with free trials on its website, using phrases such as: “Get FREE Same-Day Delivery.” The FTC, however, alleges that the company failed to clearly and prominently disclose that selecting the option would enroll customers in Prime and lead to monthly subscription charges.

 

While Amazon tested changes to clarify the terms between 2017 and 2022, executives repeatedly rejected them to avoid a drop in sign-ups, the FTC said. The company only implemented changes in 2022, during the FTC investigation, and was subsequently sued the following year.

 

The FTC alleges that Amazon’s lack of disclosure and its multi-step cancellation process, designed to discourage customers from leaving Prime, violated the Restore Online Shoppers’ Confidence Act (ROSCA).

 

An FTC expert estimated that Amazon signed up 40 million shoppers for Prime without their consent, with internal data showing tens of millions abandoned the cancellation process midway. This procedure, internally called the “Iliad flow,” required up to seven clicks to fully cancel a membership, despite Amazon directions implying the process was complete after only a few steps.

 

“The Iliad flow was difficult to access and difficult to complete,” said Reid Nelson, a former Amazon user-experience researcher, during testimony.

 

Amazon argues that the FTC is misinterpreting its internal efforts to improve the customer experience and contends that ROSCA does not require a cancellation mechanism to be prominently displayed or user-friendly. Kaba described the law’s requirements as ambiguous and said compliance “shouldn’t feel like Goldilocks trying to find the right formula.”

 

The trial is expected to last around a month and will feature testimony from both customers and current and former Amazon employees.

 

The FTC enters the trial with an advantage after a ruling that Amazon violated ROSCA by collecting customers’ billing information before disclosing Prime’s terms and conditions. The judge also held the three executives liable for any violations the jury finds.