Amazon and Adore Me Stumble on Subscriptions
The Federal Trade Commission sued Amazon Wednesday, alleging the marketplace “knowingly duped millions of consumers into unknowingly enrolling” in Prime.
The lawsuit took aim at what the FTC called “manipulative” user-interface designs, or “dark patterns,” that “trick” consumers into enrolling in auto-renewing Prime subscriptions. It also targeted the Prime cancellation process, which it alleged was designed to stop subscribers from canceling.
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“Amazon tricked and trapped people into recurring subscriptions without their consent, not only frustrating users but also costing them significant money,” FTC chair Lina Khan said in a statement. “These manipulative tactics harm consumers and law-abiding businesses alike. The FTC will continue to vigorously protect Americans from ‘dark patterns’ and other unfair or deceptive practices in digital markets.”
The lawsuit came a day after Sen. Bernie Sanders, I-Vt., launched an investigation into “dangerous and illegal” conditions at Amazon warehouses and less than a month after the FTC fined Amazon $30.8 million for privacy violations related to its Alexa and Ring products. In early 2021, it settled another unrelated issue, this time related to failing to pay Amazon Flex drivers the full amount of tips they received. It was forced to pay $61.7 million.
Tuesday’s complaint alleged that “some” employees pushed Amazon executives responsible for Prime to change the program’s enrollment process. Those leaders, however, slowed, avoided and undid user experience changes they knew would reduce “nonconsensual enrollment” because the changes would negatively affect profits, the FTC said.
The commission’s investigation into Amazon’s practices dates to at least March 2021, when the FTC said it issued a civil investigative demand (CID) to Amazon seeking information regarding its Prime enrollment and cancellation practices. The inquiry remained under wraps until March of last year, when an Insider report referenced “a previously undisclosed inquiry” from the FTC.
The article centered on internal documents that reportedly showed Amazon was concerned, since at least 2017, that customers felt manipulated into signing up for Prime. The report claimed that fixes for these issues were proposed and considered, but eventually shelved by executives when tests showed lower subscription growth.
By the time Insider published the article, the FTC said, Amazon had produced “a small amount” of material—not including documents and information leaked to Insider. The commission’s lawsuit claims “at least some of it” was responsive to its outstanding CID. The FTC issued an “extensive” follow-up demand for additional information the following month that it claims Amazon did not comply with.
In June last year, it issued an additional CID to Amazon, as well as current and former employees. The company did not comply with the CID, the FTC alleged. Rather, Amazon and individual CID recipients petitioned in August to “quash” the latest CIDs. The FTC denied the petition in September.
“Amazon largely failed to timely produce the documents the CIDs require,” the FTC wrote. “Although Prime is the world’s largest subscription program, Amazon produced fewer than [redacted] documents during the entire two-year investigation. Small businesses routinely produce more material to Commission investigators. Moreover, Amazon did not produce most of those documents before October 2022—eighteen months after the Commission’s initial CID.”
The lawsuit argues Amazon’s actions constituted intentional misconduct meant to delay the FTC’s investigation and complaint and, in fact, did delay its investigation. If not for Amazon’s effort “to frustrate” the investigation, the FTC, said it would’ve filed its action “many months earlier.”
Amazon, however, contends that “the FTC’s claims are false on the facts and the law.” In a statement addressing the lawsuit, the company said it is “clear and simple for customers to both sign up for or cancel their Prime membership.”
“We also find 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 before they filed a lawsuit,” the company said. “While the absence of that normal course engagement is extremely disappointing, we look forward to proving our case in court.”
According to the FTC’s lawsuit, until recently Amazon required customers intending to cancel navigate a “four-page, six-click, fifteen-option cancellation process.” Enrolling in Prime, on the other hand, only takes one or two clicks, it added. Additionally, Amazon enabled customers to enroll in Prime through devices other than smartphones and computers—including via the Prime Video app on its FireStick or Fire TV—but did not allow them to cancel on the same device, the FTC said.
Per the complaint, this design did not change between 2016 and April of this year. The FTC argues that Amazon’s change to its cancellation process resulted from “substantial pressure” from the commission. Furthermore, it contends the cancellation process still contains “problematic elements” that signal that “although the form of the cancellation flow recently changed, Amazon’s mindset has not.”
The FTC’s complaint alleged Amazon violated the Federal Trade Commission Act and Restore Online Shoppers’ Confidence Act (ROSCA), including provisions prohibiting charging consumers through a “negative option feature;” failing to clearly and conspicuously disclose all material terms of the transaction—such as the price of Prime, its auto-renewal provision and cancellation requirements—before obtaining billing information; failing to obtain consumers’ express informed consent before charging them; and failing to provide a simple cancellation mechanism.
Adore Me
Last week, attorneys general from 31 states and the District of Columbia reached a settlement with lingerie retailer Adore Me, Inc. over similar allegations, including misleading customers on its membership program and making it difficult for them to cancel. The company will pay $2.35 million to the participating states.
In a statement, Adore Me said the allegations stem from practices dating back to around January 2012 to January 2016. “Adore Me strongly values our customer relationships and takes our responsibilities to our customers and subscription management practices very seriously,” it said.
The settlement states the Victoria’s Secret-owned lingerie seller failed to properly disclose to consumers the terms of its VIP membership program and the amount of the monthly charge; misrepresented that its discounted prices were time-limited; made it difficult to cancel its VIP membership; and improperly forfeited customers’ VIP Membership store credits.
Adore Me’s VIP Membership Program charged customers $39.95 per month unless, before the sixth of the month, they either made a purchase or logged online to “skip” the charge. The monthly charges accrued in the member’s account as store credits toward future purchases. The settlement requires Adore Me notify all members with outstanding balances that they can obtain a refund of any unused store credits by mid-July. It also compels Adore Me to clearly disclose the terms, prices and frequency of its recurring charges; obtain customers’ express informed consent to all recurring charges; and provide a simple online mechanism for customers to cancel their memberships.
Editor’s note: This article was updated on June 27, 2023 with a statement from Adore Me.
