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Amazon duped millions of consumers into enrolling in Prime, US FTC says

Published Jun 21, 2023 10:12AM ET Updated Jun 21, 2023 09:30PM ET
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© Reuters. An Amazon Prime truck is pictured as it crosses the George Washington Bridge on Interstate Route 95 during Amazon's two-day "Prime Early Access Sale" shopping event for Amazon members in New York City, New York, U.S., October 11, 2022. REUTERS/Mike Segar
 
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By David Shepardson

WASHINGTON (Reuters) -The U.S. Federal Trade Commission on Wednesday accused Amazon.com (NASDAQ:AMZN) of enrolling millions of consumers into its paid subscription Amazon Prime service without their consent and making it hard for them to cancel, the agency's latest action against the ecommerce giant in recent weeks.

The FTC sued Amazon in federal court in Seattle, alleging that the company has "knowingly duped millions of consumers into unknowingly enrolling in Amazon Prime." In a statement, Amazon called the FTC's claims "false on the facts and the law."

Amazon has used "manipulative, coercive or deceptive user-interface designs known as 'dark patterns' to trick consumers into enrolling in automatically renewing Prime subscriptions," the FTC said as it seeks civil penalties and a permanent injunction to prevent future violations.

The lawsuit is one of several actions taken by President Joe Biden's administration intended to rein in the outsized market power of Big Tech firms as it tries to increase competition to protect consumers.

The FTC said Amazon Prime is the world's largest subscription program, generating $25 billion in revenue annually. It offers fast, free shipping on millions of items, various discounts and access to movies, music and television series, as well as other benefits.

Prime members in the United States pay $139 per year and drive much of Amazon's sales volume. Prime, which has more than 200 million members worldwide, is crucial to Amazon's other businesses including its streaming service Prime Video and its grocery delivery service.

In its statement, Amazon said, "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."

Amazon added it finds "it concerning that the FTC announced this lawsuit without notice to us, in the midst of our discussions with FTC staff members to ensure they understand the facts, context, and legal issues, and before we were able to have a dialog with the commissioners themselves."

Wednesday's lawsuit came on the day Amazon announced the July dates of its major sales event Prime Day.

The lawsuit said that under substantial pressure from the FTC, Amazon changed its cancellation process in April but that "violations are ongoing" and that it still "requires five clicks on desktop and six on mobile for consumers to cancel from Amazon.com."

Amazon's shares were up 0.2% in afternoon trading.

The FTC has been investigating sign-up and cancellation processes for the Prime program since March 2021.

Consumers who attempted to cancel Prime were faced with multiple labyrinthine steps to accomplish the task of cancelling, according to the complaint. The FTC complaint said Amazon used the term "Iliad Flow" to describe the process it began in 2016, referencing Homer's epic poem about the lengthy Trojan war.

Amazon also committed "intentional misconduct" meant to delay the FTC's investigation by providing "bad faith" responses to requests for documents, the agency said.

Insider Intelligence senior analyst Evelyn Mitchell-Wolf said that the "FTC is making an example of Amazon, but it's quite common for companies to make it more difficult to cancel an account than it is to create one."

"Amazon's market power might work against it in this instance, as the FTC won't have a hard time proving that consumers are, indeed, harmed if Amazon impedes their ability to exercise their choice to cancel their Prime membership," Mitchell-Wolf added.

The FTC on May 31 announced a $5.8 million settlement with Amazon's Ring doorbell camera unit after the agency said cameras had been used for spying on some customers. On the same day, the FTC said Amazon agreed to pay $25 million to settle allegations that it violated children's privacy rights by failing to delete Alexa virtual assistant technology recordings at the request of parents and keeping them longer than necessary.

The new lawsuit is "emblematic of efforts by governments across the globe to rein in the excess influence of big tech," including Amazon, Apple (NASDAQ:AAPL) and Meta, according to Tom Forte, managing director at D.A. Davidson Companies.

But Forte also pointed to other retailers and subscription services that make it difficult to end memberships.

Amazon duped millions of consumers into enrolling in Prime, US FTC says
 

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Comments (13)
Derick Lim
Derick Lim Jun 22, 2023 3:06AM ET
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The newest Ponzi
Brian Dodge
Brian Dodge Jun 22, 2023 12:03AM ET
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ftc head Khan has a hair across her ass for amzn for years. everyone expected her to pick sometthing to pick on. this is a joke. her diatribe today about difficulty canceling prime illustrated the extent of her pure bias and cluelessness.
Ge K
Ge K Jun 21, 2023 10:40PM ET
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F Bezos
Tim F
Tim F Jun 21, 2023 10:02PM ET
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Bezoz did fundraising for sleepy corrupt brandon. I guess he’s not getting what he paid for
Joe Lock
Joe Lock Jun 21, 2023 8:19PM ET
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It's easy to cancel but they do trick you at checkout.
Ray Christy
targetbuster Jun 21, 2023 2:55PM ET
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To finish the below post, I kind of feel like paying for Prime in the past just helped pay for Bezos' yacht, Bezos' divorce, and his golden parachute. I don't make any more, or any fewer trips to the UPS Store to return fouled-up orders than I did before I cancelled Prime, so what's the point?
Ray Christy
targetbuster Jun 21, 2023 2:46PM ET
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Had Prime for a couple of years, and it was OK. But when 40% to half of your orders either come partially fulfilled, damaged, or not at all (delivered to someone else), what's the point? Cancelled it about 9 months ago and never noticed the difference.
Alan Rice
Alan Rice Jun 21, 2023 1:53PM ET
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With all those benefits and perks (in Prime Membership) WHY would anyone want to cancel ??
rob mann
rob mann Jun 21, 2023 10:56AM ET
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Bate and switch. Signed up for two fay deliveries then Amazon changed it to fast deliveries 🤔
Tru Gfu
Tru Gfu Jun 21, 2023 10:56AM ET
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learn to spell
LL MM
LL MM Jun 21, 2023 10:56AM ET
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On most others sites you would use adblockers to block off all that scam...
 
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