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Amazon and the Federal Trade Commission are squaring off in a long-awaited trial over whether the company duped users into paying for Prime memberships.
The lawsuit, filed by the FTC in June 2023 under the Biden administration, alleges that Amazon deceived tens of millions of customers into signing up for its Prime subscription program and sabotaged their attempts to cancel it. Amazon has denied any wrongdoing.
The trial is being held in a federal court in Seattle, Amazon’s backyard. Jury selection began Monday and opening arguments are slated for Tuesday, with the trial expected to last about a month.
Launched in 2005, Amazon’s Prime program has grown to become one of the most popular subscription services in the world, with more than 200 million members globally, and it has generated billions of dollars for the company. Membership costs $139 a year and includes perks like free shipping and access to streaming content. Data has shown that Prime members spend more and shop more often than non-Prime members.
Amazon founder and Executive Chairman Jeff Bezos famously said the company wanted Prime “to be such a good value, you’d be irresponsible not to be a member.”
Regulators argue Amazon broke competition and consumer protection laws by tricking customers into subscribing to Prime. They pointed to examples like a button on its site that instructed users to complete their transaction and did not clearly state they were also agreeing to join Prime for a recurring subscription.
“Millions of consumers accidentally enrolled in Prime without knowledge or consent, but Amazon refused to fix this known problem, described internally by employees as an ‘unspoken cancer’ because clarity adjustments would lead to a drop in subscribers,” the agency wrote in a court filing last week.
The FTC says the cancellation process is equally confusing, requiring users to navigate four webpages and choose from 15 options — a “labyrinthian mechanism” that the company referred to internally as “Iliad,” referencing Homer’s epic poem about the Trojan War.
Amazon has argued that the Prime sign-up and cancellation processes are “clear and simple,” adding that the company has “always been transparent about Prime’s terms.”
“Occasional customer frustrations and mistakes are inevitable — especially for a program as popular as Amazon Prime,” the company wrote in a recent court filing. “Evidence that a small percentage of customers misunderstood Prime enrollment or cancellation does not prove that Amazon violated the law.”
A crackdown on ‘dark patterns’
The FTC notched an early win in the case last week when U.S. District Court Judge John Chun ruled Amazon and two senior executives violated the Restore Online Shoppers’ Confidence Act by gathering Prime members’ billing information before disclosing the terms of the service.
Chun also said that the two senior Amazon executives would be individually liable if a jury sides with the FTC due to the level of oversight they maintained over the Prime enrollment and cancellation process.
Amazon’s Prime boss, Jamil Ghani, and Neil Lindsay, a senior vice president in its health division who previously oversaw Prime’s technology and business operations, are named defendants in the complaint.
Russell Grandinetti, Amazon senior vice president of international consumer, is also named in the suit, but Chun argued he had “less involvement in the operation of the Prime organization” compared with Ghani and Lindsay.
Chun also scolded attorneys for Amazon in July for withholding thousands of documents from the FTC and abusing a legal privilege to shield them from scrutiny. Among the documents was a 2020 email where Amazon’s retail chief, Doug Herrington, said “subscription driving” was a “shady” practice and referred to Bezos as the company’s “chief dark arts officer.”
Amazon spokesperson Maxine Tagay told CNBC in a statement, “The bottom line is that neither Amazon nor the individual defendants did anything wrong — we remain confident that the facts will show these executives acted properly and we always put customers first.”
The company also faces a separate lawsuit brought by the FTC in 2023 accusing it of wielding an illegal monopoly. That case is set to go to trial in February 2027.
The Prime case is part of the FTC’s broader crackdown on so-called dark patterns, which it began examining in 2022. The phrase refers to deceptive design tactics meant to steer users toward buying products or services or giving up their privacy.
The agency brought a similar dark patterns lawsuit against Uber in April, accusing the ride-hailing and delivery company of deceptive billing and cancellation practices tied to its Uber One subscription service. Uber has disputed the FTC’s allegations.
Earlier this year, it reached settlements with online dating service Match and online education firm Chegg over claims that their subscription practices were deceptive or hard to cancel.
