This week, a significant federal trial is set to commence in Amazon's hometown of Seattle, examining allegations that the online retail giant misled customers into signing up for its Prime service and created obstacles for those looking to cancel their subscriptions. The Federal Trade Commission (FTC) initiated the lawsuit against Amazon in U.S. District Court two years ago, claiming that the company engaged in over a decade of legal violations, including breaches of the Restore Online Shoppers' Confidence Act. This 2010 law was established to protect consumers by ensuring transparency regarding online charges.
Jury selection for the trial began on Monday, with opening statements anticipated shortly thereafter. The Amazon Prime membership offers subscribers a range of benefits such as expedited shipping, access to video streaming, and discounts at Whole Foods, all for an annual fee of $139 or a monthly fee of $14.99. The service has become a crucial aspect of Amazon's business model, boasting over 200 million members. In its latest quarterly report, Amazon revealed that it generated over $12 billion in net revenue from subscription services, marking a 12% increase compared to the previous year. This revenue encompasses both annual and monthly fees from Prime memberships as well as other subscription offerings like music and e-books.
In its defense, Amazon maintains that it provides clear explanations of Prime's terms prior to charging customers. The company claims to offer straightforward cancellation methods, including options via phone, online, and through chat services. In a trial brief filed last week, Amazon stated, “Occasional customer frustrations and mistakes are inevitable — especially for a program as popular as Amazon Prime.” The company argues that evidence of a small percentage of customers misunderstanding the enrollment or cancellation process does not equate to a violation of the law.
Contrarily, the FTC asserts that Amazon intentionally complicated the purchasing process to encourage Prime subscriptions. According to the agency, customers were often presented with options to complete transactions that did not clearly indicate that they would simultaneously enroll them in Prime. The FTC's trial brief emphasizes, “Amazon has long known that millions of its customers struggled with enrollment and cancellation of its subscription service, Prime.” The commission claims that many consumers inadvertently enrolled in Prime without their knowledge or consent and that Amazon failed to rectify this ongoing issue, which employees internally described as an 'unspoken cancer' due to its potential impact on subscriber numbers.
The process of unsubscribing from Prime has been criticized as overly complicated. The FTC's complaint highlights that Amazon leadership has either slowed or outright rejected changes aimed at simplifying the cancellation process. Internally, Amazon referred to this cumbersome process as “Iliad,” drawing a comparison to the lengthy siege depicted in the ancient Greek poem about the Trojan War. Customers who wish to cancel their membership must navigate through three pages affirming their intent to terminate their subscription.
Recently, U.S. District Judge John Chun, appointed by former President Joe Biden, ruled that the Restore Online Customers' Confidence Act applies to Prime. He has also restricted some of Amazon's legal defenses and agreed with the FTC's assertion that Amazon violated the law by collecting customers' billing information before adequately disclosing the terms of Prime membership. However, Chun clarified that the jury must still assess whether Amazon's disclosure of Prime's essential terms is “clear and conspicuous,” and whether the “Iliad” cancellation method is compliant with the law’s requirements for simplicity.
Furthermore, Judge Chun determined that two Amazon executives, Neil Lindsay and Jamil Ghani, are deeply involved with the Prime program and could face personal liability if the jury rules in favor of the FTC. A third executive, Russell Grandinetti, may also be held personally liable depending on the jury’s decision.
In a statement released on Monday, Amazon asserted, “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 FTC, which opted not to comment on the matter, began its investigation into Amazon's Prime subscription practices in 2021 during the Trump administration. The lawsuit was officially filed in 2023 under the leadership of former FTC Chair Lina Khan, a noted antitrust expert appointed by President Biden.
In addition to this case, the FTC is also pursuing an antitrust lawsuit against Amazon, accusing the company of monopolistic practices within online markets. In a July ruling, Judge Chun criticized Amazon for withholding 70,000 documents from the FTC, including materials improperly designated as containing internal legal advice, labeling such conduct as “tantamount to bad faith.”
Amid these legal challenges, Amazon is navigating its relationships with various political figures, including President Trump, who has previously criticized the corporation. In December, Amazon contributed $1 million to Trump's inauguration fund, and Amazon founder Jeff Bezos was present at the event. Additionally, the company’s Prime Video platform has started streaming “The Apprentice,” the reality show that significantly elevated Trump's public profile prior to his presidential campaign, and is working on a documentary offering a unique behind-the-scenes perspective on first lady Melania Trump.
