FTC Complaint Against Amazon: The Legal Implications of Amazon Prime Subscription Cancellation Practices

Amazon FTC

The Federal Trade Commission (FTC) lodged a complaint against Amazon on June 21, 2023, accusing it of numerous violations under the Restore Online Shoppers’ Confidence Act (ROSCA). The FTC alleges that the online giant implemented strategies that made cancelling Amazon Prime subscriptions unduly challenging for consumers.

The 150-page complaint, heavily censored, points out that Amazon’s website was structured to misleadingly sign up customers by offering multiple chances to join Prime while interacting with Amazon’s services, like Prime Video. The FTC argues that the site’s design complicates the process of declining the offer compared to accepting it, needing several steps to reject it but just one to immediately join Prime. These offers commonly included “free trial” language, failing to disclose that the “free trial” would automatically renew after the first month, billing the full cost. This led to a significant number of customers unknowingly or unintentionally becoming Prime members, a clear breach of ROSCA.

The FTC further alleges that Amazon made the process of canceling Prime subscriptions—whether the subscriptions were intentional or not—intentionally burdensome. The corporation referred to this complex procedure, introduced in 2016, as the “Iliad Flow,” echoing Homer’s epic. To cancel their Prime subscription, users needed to navigate through a four-page, six-click, fifteen-option process. The FTC alleges that this was an intentional move to minimize the number of cancellations.

Based on these accusations, the FTC initiated a legal action against Amazon in the United States District Court, Western District of Washington, accusing the company of ROSCA violations and hindering the agency’s investigation that started in March 2021. The FTC requested Amazon to hand over relevant documents at that time. According to the FTC’s business blog, although Amazon had agreed to comply, it only submitted a few documents. The FTC alleges that it was evident from information leaked and published by Business Insider in March 2022 that Amazon had been evasive in its response to the agency’s request until October 2022, almost a year and a half later.

The FTC’s complaint lists ROSCA violations such as charging consumers without their consent, failing to disclose adequately, nonconsensual enrollment, and not providing a straightforward cancellation mechanism. The FTC is pursuing a permanent injunction, monetary civil penalties for each ROSCA violation, and any further relief the court may grant under ROSCA and the Federal Trade Commission Act.

From a legal perspective, this case could have significant implications for online businesses, especially subscription-based services. If the FTC’s allegations against Amazon are upheld, it could set a new precedent for how such services should operate, potentially resulting in significant changes to current business practices.

The FTC’s enforcement action underscores the importance of clear, conspicuous, and honest disclosures to consumers, particularly regarding subscription-based business models. If the FTC’s complaint is successful, it could signal to other businesses the need for full transparency around auto-renewing subscriptions and the necessity of easy cancellation processes.

Furthermore, the complaint serves as a reminder of the seriousness with which the FTC regards its investigative authority. Amazon’s alleged obstruction of the agency’s investigation, if proven, could send a strong message to businesses about the FTC’s willingness and capacity to penalize such behavior. This aspect of the case could set a precedent regarding the expected level of cooperation in future investigations, indicating that businesses failing to comply could face additional legal consequences.

This case may also bolster consumer trust and protection laws. If the FTC is successful in securing a permanent injunction and monetary civil penalties, it would reaffirm the agency’s role in protecting consumers from deceptive business practices. In turn, consumers might feel more confident when navigating online shopping environments.

However, it’s important to note that these are allegations at this point, and Amazon will have the opportunity to defend itself in court. The outcome of the case will depend on the evidence presented and the interpretation of the law by the court. Therefore, while the case could have potential far-reaching implications, its impact will ultimately depend on the court’s final ruling.

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The information provided in this article is for general informational purposes only and should not be construed as legal or tax advice. The content presented is not intended to be a substitute for professional legal, tax, or financial advice, nor should it be relied upon as such. Readers are encouraged to consult with their own attorney, CPA, and tax advisors to obtain specific guidance and advice tailored to their individual circumstances. No responsibility is assumed for any inaccuracies or errors in the information contained herein, and John Montague and Montague Law expressly disclaim any liability for any actions taken or not taken based on the information provided in this article.

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