FTC Lawsuit Alleges Amazon of Tricking and Trapping Customers into Recurring Prime Subscriptions
Right on the heels of Amazon’s 2023 Prime Day announcement, the Federal Trade Commission (FTC) has filed a complaint accusing the tech giant of duping customers into signing up for Prime and “knowingly” making it hard for them to opt-out.
What are the details of the complaint?
According to FTC, for years Amazon has employed what is being described as “manipulative, coercive, or deceptive tactics” in an effort to steer customers towards signing up for Prime, even if the customers may have harbored reservations at enrolling. Subsequently, these subscriptions were set to auto-renew, resulting in a monthly charge of $14.99 or an annual fee of $139.
Prime holds a major role within the tech giant’s retail empire, as its members tend to exhibit heightened shopping activity and expenditure. As of 2020, Amazon had a total paying Prime members of 200 million.
However, the current FTC lawsuit claims that a portion of these subscribers may have been acquired through deceptive means.
What are Dark Patterns?
Coined by British User Experience (UX) designer Harry Brignull, dark patterns are “deceptive user interfaces” designed to get people into performing an action that they didn’t mean to. Common types of dark patterns include:
- Disguised ads – The individual, under the false impression, assumes they are interacting with an interface element or genuine content, unaware that it is, in fact, a cleverly disguised ad. For example, popular software download site Softpedia features a conspicuous download button that bears a striking resemblance to the genuine download button for the desired software. Consequently, users inadvertently fall prey to this deceptive design, mistakenly clicking on the ad thinking that they are initiating the actual software download.
Another example of this type of dark UX may be observed in Amazon’s search results. The Washington Post reveals that unbeknownst to many Amazon users, the initial search results they encounter when looking for a product are primarily comprised of advertisements rather than organic listings. This exposes Amazon’s questionable tactics, as the company compromises the trust placed in its search results in order to generate additional revenue.
- Bait and switch – When deceptive data or false information is presented, it revolves around the user’s interests and triggers their curiosity. Once the user expresses interest and proceeds by clicking, the information or data undergoes a complete transformation or shift. Bait and switch tactics are commonly employed by businesses to attract more clicks.
Such a strategy enables site owners to generate additional revenue from ad impressions, while advertisers enjoy the advantages of enhanced click-through rates, potentially leading to increased sales.
- Hidden subscription – The covert scheme of hidden subscriptions works by utilizing sneakiness and misdirection. Users are led to believe they are making a one-time purchase, unaware of a concealed legal provision that commits them to an ongoing subscription. After signing up, the service operates discreetly, refraining from sending any emails or notifications to remind users about the recurring payments. This lack of communication ensures that payments go on for an extended duration. Additionally, this tactic is commonly coupled with the hard-to-cancel deceptive pattern.
- Hard-to-cancel subscriptions – Signing up is easy but canceling is difficult. More on that later.
- Buried terms or hidden costs – Companies entice consumers by advertising only a fraction of the product’s total price while conveniently omitting any mention of mandatory fees until the later stages of the buying process. In a notable case involving LendingClub, the FTC accused the online lender of utilizing prominent visuals (design elements like art, text, and color that grab attention) to deceptively assure loan applicants that they would receive a specific loan amount and encounter “no hidden fees.” However, the mention of mandatory fees was cleverly tucked away behind tooltip buttons and inserted amidst more conspicuous text.
- Tricks to obtain user data – These deceptive tactics often disguise themselves as granting users the power to make decisions regarding their privacy preferences or data sharing. However, their true intention is to deliberately guide users towards the choice that surrenders the greatest amount of personal information. According to FTC, smart TV manufacturer VIZIO was accused of facilitating default settings that enabled the company to gather and distribute consumers’ viewing habits to third parties. Only a small number of consumers received a brief notice regarding this practice.
Trick and Trap Tactics Allegedly Used by Amazon
FTC’s case involving Amazon focuses on the company’s hidden subscription and difficult-to-cancel tactics. By employing these devious mechanisms, Amazon has presumably violated the FTC Act and the Restore Online Shoppers’ Confidence Act.
FTC says throughout Amazon’s online checkout process, customers encountered multiple instances where they were presented with the chance to become Amazon Prime subscribers at a monthly cost of $14.99.
Often, it proved challenging for customers to find the option of buying items on Amazon without subscribing to Prime. Additionally, in certain situations, the button provided to finalize the transaction did not explicitly indicate that by choosing that option, customers were also agreeing to enroll in Prime for a recurring subscription.
To strategically dissuade members from leaving, especially after raising membership fees from $119 to $139 annually, Amazon has implemented a laborious opt-out process called the “Iliad Flow.” This process draws parallels to Homer’s epic poem about the decade-long Trojan War. In other words, if customers wanted to unsubscribe from Prime, it will take them ages to effectively do so.
In a blog post published September 2022, market analyst Dr. Pierre-Nicolas Schwab shares how Amazon used two dark pattern mechanisms to discourage members from terminating their Prime subscriptions.
- Make it difficult to find Prime in the menu.
- Put in place multiple confirmation prompts.
Allegedly, Amazon deliberately obscured the cancellation process, making it challenging for customers to locate. Upon discovering the cancellation flow, they were then directed to a series of pages enticing them with various offers, such as discounted subscription rates, the option to disable auto-renewal, or the choice to retain the service. It was only after navigating through these pages that members could ultimately proceed with canceling the service.
Based on internal Amazon documents reviewed by Insider in early 2022, it is believed that the company possessed knowledge of customers being involuntarily enrolled and encountered difficulties when attempting to opt out of Prime. And yet, the execs reportedly neglected to tackle these concerns until they were notified of FTC’s investigation.
Worse, FTC’s lawsuit also alleges that Amazon made deliberate efforts to delay the Commission’s investigation on several occasions.
In an email to The Verge, Amazon spokesperson Heather Layman told the media outlet that the claims put forth by the Commission were entirely unfounded both in terms of factual accuracy and legal basis.
“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,” Layman explained. 🤔
It is worth noting that the Commision recently proposed a new provision requiring sellers to make unsubscribing as easy as signing up. So, it looks like the FTC wanted to make an example of Amazon by filing suit.
“The proposed rule would require that companies make it as easy to cancel a subscription as it is to sign up for one. The proposal would save consumers time and money, and businesses that continued to use subscription tricks and traps would be subject to stiff penalties.” said FTC Chairperson Lina Khan.
If proven guilty, Amazon may find themselves paying up to $50,120 in civil penalties per violation of an FTC rule. Considering how quickly these penalties can add up, now’s the best time for the tech giant to review their business practices to ensure FTC compliance.