Amazon trial begins on FTC claims it duped Prime subscribers

FTC alleges Amazon’s Prime sign-up practices violated consumer protection law Amazon denies wrongdoing, claims clear disclosure of Prime terms Trial to include testimony from customers and Amazon employees By Dan Catchpole and Jody Godoy SEATTLE, Washington, Sept 23 (Reuters) - Amazon (AMZN.O) duped tens of millions of Prime customers by signing them up without consent and locking them in with overly complex cancellation methods, the U.S. Federal Trade Commission will seek to show at a trial starting in Seattle on Tuesday. The civil case against the online retail giant and three of its executives is a key test of the FTC’s tough-on-tech stance and could force Amazon to pay damages worth hundreds of millions of dollars, plus fines of up to $53,000 per violation. It could also damage the image of a company that describes itself as obsessed with making customers’ lives easier. Amazon has denied wrongdoing by the company or its executives, saying Prime’s terms are clearly disclosed and there are several ways to cancel. The case is part of a bipartisan crackdown on what the FTC says are deceptive cancellation practices. The FTC started probing Amazon’s subscription practices during President Donald Trump’s first term and the case was filed during Joe Biden’s presidency. In April, the FTC sued Uber (UBER.N) alleging it deceptively marketed its Uber One subscription, and sued the operators of gym chain LA Fitness in August for burdensome membership cancellation requirements. Those probes began during the Biden administration. Prime subscribers pay $14.99 for free expedited shipping, access to Amazon’s streaming video service and other benefits. Amazon recruits new subscribers by offering free trials on its website using pitches such as: “Get FREE Same-Day Delivery.” But the FTC says Amazon has failed to clearly and conspicuously disclose to customers that selecting that option will enroll them in Prime and eventually result in monthly subscription charges. While Amazon tested changes that would make those terms clearer between 2017 and 2022, executives several times rejected them to prevent sign-ups from declining, the FTC said. The company did not adopt such changes until 2022, while it was under investigation by the FTC, the agency said. The agency sued Amazon the next year. The FTC says Amazon’s failure to disclose Prime’s terms, along with multi-screen cancellation processes designed to keep customers from quitting Prime, violated the Restore Online Shoppers’ Confidence Act (ROSCA). Amazon signed up 40 million shoppers for Prime without their consent, an expert witness for the FTC has estimated. And the company’s own data shows that tens of millions of users abandoned the cancellation process midway through, an FTC official said. The company has accused the FTC of trying to stretch the law and misinterpreting its internal efforts to understand and improve customers’ experience. Additionally, ROSCA “does not require that a cancellation mechanism be well-promoted or popular,” the company said. The trial is expected to last about a month and feature testimony from customers as well as current and former Amazon employees. A jury of nine people will decide whether Amazon violated the law. If the company is found liable, the judge will decide what penalties to impose and the amount of any damages. The FTC comes into trial at an advantage, after winning a ruling that Amazon violated ROSCA when it collected customers’ billing information in the form of saved payment methods before disclosing Prime’s terms and conditions. The judge also ruled that the three executives are liable for any violations the jury finds.