The U.S. Federal Trade Commission on Wednesday accused Amazon.com (AMZN.O) of enrolling millions of consumers into its paid subscription Amazon Prime service without their consent and making it hard for them to cancel, the agency's latest action against the ecommerce giant in recent weeks.
The FTC sued Amazon in federal court in Seattle, alleging that "Amazon has knowingly duped millions of consumers into unknowingly enrolling in Amazon Prime." The FTC said Amazon used "manipulative, coercive or deceptive user-interface designs known as 'dark patterns' to trick consumers into enrolling in automatically renewing Prime subscriptions."
The agency is seeking civil penalties and a permanent injunction to prevent future violations.
The lawsuit is one of several actions taken by President Joe Biden's administration intended to rein in the outsized market power of Big Tech firms as it tries to increase competition to protect consumers.
The FTC said Amazon Prime is the world's largest subscription program, generating $25 billion in revenue annually. It offers fast, free shipping on millions of items, various discounts and access to movies, music and television series, as well as other benefits.
Prime members in the United States pay $139 per year and drive much of Amazon's sales volume. Prime, which has more than 200 million members worldwide, is crucial to Amazon's other businesses including its streaming service Prime Video and its grocery delivery service.
Amazon did not immediately respond to a request for comment.
"One of Amazon's primary business goals - and the primary business goal of Prime - is increasing subscriber numbers," the FTC said.
The lawsuit said that under substantial pressure from the FTC, Amazon changed its cancellation process in April but that "violations are ongoing" and that it still "requires five clicks on desktop and six on mobile for consumers to cancel from Amazon.com."
Amazon's shares were down 0.9% in midday trading.
The FTC has been investigating sign-up and cancellation processes for the Prime program since March 2021.
"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.
Consumers who attempted to cancel Prime were faced with multiple labyrinthine steps to accomplish the task of cancelling, according to the complaint. The FTC complaint said Amazon used the term "Iliad Flow" to describe the process it began in 2016, referencing Homer's epic poem about the lengthy Trojan war.
Amazon also committed "intentional misconduct" meant to delay the FTC's investigation by providing "bad faith" responses to requests for documents, the agency said.
Insider Intelligence senior analyst Evelyn Mitchell-Wolf said that the "FTC is making an example of Amazon, but it's quite common for companies to make it more difficult to cancel an account than it is to create one."
"Amazon's market power might work against it in this instance, as the FTC won't have a hard time proving that consumers are, indeed, harmed if Amazon impedes their ability to exercise their choice to cancel their Prime membership," Mitchell-Wolf added.
The new lawsuit is "emblematic of efforts by governments across the globe to rein in the excess influence of big tech," including Amazon, Apple and Meta, according to Tom Forte, managing director at D.A. Davidson Companies.
But Forte also questioned the FTC's strategy, pointing to other retailers and subscription services that make it difficult to end memberships.
Wednesday's lawsuit came on the day Amazon announced the dates of its major sales event Prime Day - July 11-12.
