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FTC Accuses Amazon of Tricking Millions into Prime Membership: Unpacking the Lawsuit

In a groundbreaking lawsuit, the U.S. Federal Trade Commission alleges that Amazon used deceptive practices to enroll consumers into its Prime subscription service.

Amazon Prime logo
Amazon Prime logo

Amazon Under Fire for 'Dark Patterns

The US Federal Trade Commission (FTC) recently launched a lawsuit against e-commerce giant, Inc (NASDAQ: AMZN). According to the suit filed in federal court in Seattle, the company allegedly tricked millions of unsuspecting consumers into enrolling in its paid subscription service, Amazon Prime. The FTC also accused Amazon of making it difficult for customers to cancel their memberships.

How Amazon Allegedly Duped Consumers

The FTC suggests that Amazon utilized manipulative, coercive, or deceptive user-interface designs, popularly referred to as 'dark patterns'. These tactics allegedly led consumers to inadvertently enroll in auto-renewing Prime subscriptions.

Prime Membership: A Major Revenue Stream for Amazon

The Amazon Prime service, offering fast and free shipping on numerous items, a plethora of discounts, and access to various entertainment options, has a significant customer base. In the United States alone, Prime members contribute a substantial portion of Amazon's sales volume with an annual fee of $139. With over 200 million members globally, Amazon's Prime subscription generates a staggering $25 billion in annual revenue.

Federal Trade Commission Building
Federal Trade Commission Building

FTC Seeks to Curb Future Violations

Despite considerable pressure from the FTC prompting Amazon to alter its cancellation process in April, the lawsuit asserts that the violations are ongoing. To prevent future infringements, the FTC seeks civil penalties and a permanent injunction.

The Impact on Amazon's Stock and FTC's Ongoing Investigation

The lawsuit news negatively impacted Amazon's shares, which were down by 0.9% in mid-morning trading. The FTC has been investigating Amazon's Prime program's sign-up and cancellation procedures since March 2021, but the company has yet to issue a response to the recent allegations.

'Iliad Flow': Amazon's Complex Cancellation Process

FTC Chair Lina Khan stated, "Amazon tricked and trapped people into recurring subscriptions without their consent, not only frustrating users but also costing them significant money." The commission's complaint detailed the complex multiple steps that users had to navigate to cancel their Prime membership. Interestingly, Amazon labeled this intricate process the "Iliad Flow," referencing Homer's lengthy epic about the Trojan War, to denote the complexity of the cancellation process.