On June 21, 2023, the Federal Trade Commission ("FTC" or "the Commission") filed a heavily redacted Complaint against Amazon.com Inc. ("Amazon") in the Western District Court of Washington. The Complaint alleges that the practices used by Amazon to obtain subscription consent violate both Section 5 of the Federal Trade Commission Act ("FTC Act") and the Restore Online Shoppers' Confidence Act ("ROSCA").
Specifically, the FTC alleges that Amazon "has knowingly duped millions of consumers into unknowingly enrolling in its Amazon Prime service" ("non-consensual enrollment") by using tricks known as "dark patterns."
As discussed further in a previous KMT blog post, the FTC also accuses Amazon of "knowingly complicat[ing] the cancellation process for Prime subscribers who sought to end their membership."
Subscription Consent Process
By enrolling in Amazon Prime ("Prime"), consumers pay a monthly fee to receive different benefits, including free two-day shipping. Consumers can sign up for Prime in multiple ways. Before a consumer purchases a product, he or she is presented with at least one, but usually multiple, opportunities to join Prime. This is known in the industry as an "upsell." Amazon uses two kinds of upsells: Interstitial, which is a page that interrupts a consumers' experience and non-interstitial, which is imbedded in the checkout process. Consumers cannot avoid the upsell.
The Complaint alleges that the upsells include misleading language and manipulative designs, which all lead to consumers enrolling in Prime without their express subscription consent.
Non-Prime members search on Amazon to locate the products of their choice in the same way as Prime members do. Both Prime members and non-Prime members are then given the choice between "add to cart" and continue shopping, and a "buy now" button, which takes the consumer directly to the checkout process. Non-Prime members must then create an account.
The non-Prime member is then told that he/she can receive 30 days of Prime for free. In smaller text below that, it reads "After your FREE trial, Prime is just $14.99/month." Below are two buttons. The first says "Get Free Two-Day Delivery with Prime," which, if clicked enrolls the consumer in Prime. The second is a "No thanks" button.
According to the FCC, unless the consumer chooses to scroll down on the webpage, he/she is unable to see the fine print below the call-to-action button that informs him/her that by clicking "Get Free Two-Day Delivery with Prime," he/she has read and agreed to the Terms and Conditions and that the Prime membership will continue until canceled. The Commission notes that there is no mention of the auto-renewal feature before this disclosure.
Alleged Problems with How Amazon Obtains Subscription Consent
Overall, the Commission alleges that Amazon fails to "provide clear and conspicuous disclosures" regarding Prime's price and the fact that the service automatically renews unless and until the consumer affirmatively cancels his/her subscription. Importantly, according to the FCC, there are no adequate price disclosures provided before Amazon collects consumer billing information.
The FTC cites to multiple examples of "dark patterns" that Amazon purportedly utilizes:
- "Misdirection," by presenting choices that make it easier for the consumer to enroll in Prime than not;
- "Forced action," by forcing consumers to choose whether to enroll in Prime before allowing a consumer to complete his/her purchase; and
- "Obstruction," by making the option to decline enrollment in Prime difficult for a consumer to locate.
The FTC also alleges that Amazon's other subscription services employ similar manipulative features. These include Prime Video, Audible, Kindle Unlimited, Amazon Music Unlimited, and Subscribe & Save. Assuming that the allegations contained in the Complaint are true, these policies may violate not only Section 5 of the FCT Act and ROSCA, but various other consumer laws as well.
What Does This Mean for the Industry?
This is not the first time that the FTC has gone after one of the Big Tech firms. In fact, the FTC shows no signs of slowing down in its quest to police the online commerce space, investigating Internet retailers both big and really big.
This Complaint dates back to March 2021, when the FTC first announced its investigation into Amazon's subscription consent practices.
We expect Amazon to vigorously defend its practices in this proceeding. Where things will end up at trial is anyone's guess at this point. Notwithstanding the foregoing, in light of the FTC's crackdown on subscription consent practices, it is critical that businesses consult with experienced legal counsel to ensure that all consumer consent practices comply with FTC regulations and applicable state laws. The attorneys at Klein Moynihan Turco have years of experience in counseling clients on federal and state automatic renewal law compliance matters.
Related Blog Posts:
New Jersey Approves New Subscription Service-Automatic Renewal Law
Is California's Automatic Renewal Law the Next Litigation Cash Cow?
Was NFL Enterprises Sued for Alleged Automatic Renewal Law Violations?
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