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The Federal Trade Commission is coming after Amazon. Again. And this time it brought 17 friends.
This week, the FTC and 17 state attorneys general filed a lawsuit in US District Court claiming that the online retail and technology company is a “monopolist that uses a set of interlocking anticompetitive and unfair strategies to illegally maintain its monopoly power.”
Three months ago, the FTC lodged a complaint in US District Court accusing Amazon of “manipulative, coercive or deceptive” to trick customers to enroll in auto-renewal programs for Amazon Prime.
Amazon unleashed a 1,897-word defense Tuesday, Sept. 26 and called the FTC’s lawsuit “misguided.” The lawsuit, if successful, would force Amazon “to engage in practices that actually harm consumers and the many businesses that sell in our store — such as having to feature higher prices, offer slower or less reliable Prime shipping, and make Prime more expensive and less convenient,” according to the blog post from David Zapolsky, senior vice president, Amazon Global Public Policy & General Counsel.
“The FTC’s complaint alleges that our pricing practices, our Fulfillment by Amazon offering, and Amazon Prime are anticompetitive,” Zapolsky wrote. “In so doing, the lawsuit reveals the Commission’s fundamental misunderstanding of retail.”
The FTC, however, feels it knows retail and Amazon’s practices quite well.
“Our complaint lays out how Amazon has used a set of punitive and coercive tactics to unlawfully maintain its monopolies,” FTC Chair Lina M. Khan said in a Sept. 26 statement. “The complaint sets forth detailed allegations noting how Amazon is now exploiting its monopoly power to enrich itself while raising prices and degrading service for the tens of millions of American families who shop on its platform and the hundreds of thousands of businesses that rely on Amazon to reach them. Today’s lawsuit seeks to hold Amazon to account for these monopolistic practices and restore the lost promise of free and fair competition.”
The antitrust lawsuit comes amid the government’s similar pursuits against Google, which this week featured testimony from another tech giant, Apple.
Why the big fuss over Amazon? Simply, it’s worth watching if you’re a customer experience leader. The Amazon customer experience is the beacon of great customer experience, landing in many slide decks, keynotes and customer experience presentations far and wide.
Will This Affect Amazon Customer Experience?
So it’s worth watching to see if the mighty CX Queen will fall. Fact is, these are only lawsuits/complaints that likely get held up in court for years and end up in settlements with Amazon admitting no wrongdoing.
Legal analysis aside, the real thing CX leaders should be watching for in this FTC vs. Amazon duology? Lessons learned from the Amazon customer experience, whether it’s good or bad — particularly in the June complaint against Amazon customer experience about Prime customer renewals and cancellations.
Jeannie Walters, CCXP, founder and chief experience investigator at Experience Investigators, told CMSWire that Amazon probably has a ton of data that can show how customers love Prime and are happy to renew.
Speaking of the June 2023 FTC complaint, she said, “The argument of offering discounts to stay for those customers trying to cancel doesn’t seem illegal, in my opinion. It’s a common tactic, and I bet they have lots of data that shows how many customers take them up on the discounted offers.”
There is an argument that perhaps the cancellation process should be easier, Walters added, or maybe the optional services for sellers should be more clearly defined. “But,” she added, “these seem like customer journey improvements that most organizations need to make. This doesn’t strike me as particularly egregious.”
CX leaders should see this as a reminder to do the right thing for customers, even when it’s tempting to lure them with tricky offers or make leaving overly challenging, Walters added.
“These might not be illegal moves for most organizations,” she said, “but it’s clear the government and others are watching.”
Related Article: Amazon’s Latest AI Gives Customer Reviews a Highlight Reel
FTC’s Case Against Amazon Monopoly
Now about those two FTC actions. Here’s what the FTC lawsuit alleges this week in the monopoly case:
Overview of the FTC Complaint Against Amazon
The lawsuit addresses Amazon’s alleged deceptive and unfair acts or practices in violation of Section 5(a) of the FTC Act. The FTC alleges that Amazon engaged in deceptive and unfair practices in the operation of its e-commerce platform. The FTC contends that Amazon made misrepresentations about the price, quality and source of products, as well as the nature and terms of its Prime membership.
Additionally, Amazon is accused of interfering with consumers’ ability to make informed purchasing decisions.
Misrepresentation of Prices
Amazon is accused of misleadingly displaying reference prices (e.g., list prices or strike-through prices) to exaggerate the savings consumers would receive. This could make a deal look more attractive than it truly was.
Amazon’s Choice
The FTC alleges that the “Amazon’s Choice” badge was misleadingly awarded to products. Amazon didn’t adequately disclose the criteria for this designation, potentially leading consumers to believe that these products were objectively the best available options.
Prime Membership
The complaint asserts that Amazon did not adequately disclose the terms of its Prime membership, including the recurring nature of the charges and the difficulty of canceling the membership.
Review Manipulation
Amazon is accused of allowing fake reviews on its platform, thereby misleading consumers about the quality and popularity of products.
Sale of Counterfeit Products
The FTC alleges that Amazon sold or facilitated the sale of counterfeit products on its platform, misleading consumers about the authenticity and quality of these products.
Interference with Third-Party Sellers
Amazon is alleged to have unfairly restricted third-party sellers from offering lower prices on other platforms, thereby limiting competition.
Customer Data Practices
The complaint also touches upon Amazon’s collection and use of consumer data without adequate disclosure or consent.
What’s Next for the FTC’s Lawsuit Against Amazon?
The FTC seeks a permanent injunction to prevent Amazon from engaging in the alleged deceptive and unfair practices in the future. The commission also seeks restitution, refunds or other monetary relief for affected consumers.
Amazon’s Defense: We Bring Low Prices to Customers
Here’s a breakdown of Amazon’s 1,897-word defense by its general counsel:
Amazon’s Critique of the FTC’s Approach
Amazon hoped the FTC would acknowledge the benefits the Amazon customer experience, including its customer-centric innovations have brought to the American retail industry, such as low prices and increased competition. Amazon believes the current FTC is deviating from its historical role of consumer protection.
The lawsuit, according to Amazon, could lead to detrimental effects on the Amazon customer experience, including higher product prices, slower Prime shipping and a less convenient Prime service.
Amazon’s Pricing Model and Its Benefits
Amazon takes pride in offering low prices, and it aims to match other retailers’ prices. Third-party businesses are empowered to set their own prices, but Amazon provides tools to help them remain competitive.
The FTC’s case against Amazon’s pricing practices is seen by the company as a misunderstanding of retail dynamics.
Support for Independent Sellers on Amazon
Amazon has around 500,000 independent businesses selling on its platform, contributing to 1.5 million US jobs. The company’s transition from a purely retail model to one that includes third-party sellers has been pivotal in enhancing the Amazon customer experience.
Sellers now constitute over 60% of sales on Amazon, which Amazon attributes to the supportive ecosystem they’ve created.
Benefits of Fulfillment by Amazon (FBA)
FBA is an optional service for sellers, handling logistics aspects like storage, shipping and customer service. Amazon’s investments in FBA have created over a million jobs and significantly bolstered the American economy.
FBA offers competitive prices, often much lower than alternative shipping methods.
Amazon’s Advertising Offerings
Amazon provides optional advertising services to sellers, which many opt for due to the value they offer.
The FTC’s claim that Amazon forces sellers into their services is refuted by Amazon, emphasizing seller choice.
Innovation and Benefits of Amazon Prime
Amazon Prime, initially a free shipping program, has evolved to offer a more comprehensive Amazon customer experience for its members. Amazon has continuously enhanced Prime, with faster shipping times and integration on third-party websites.
The company finds the FTC’s portrayal of Prime as anticompetitive to be at odds with its philosophy of improving the Amazon customer experience.
Amazon’s Perspective on the Retail Landscape
The FTC’s complaint overlooks the multifaceted nature of retail competition. While Amazon has grown significantly, it remains a part of a vast retail ecosystem with multiple options for both sellers and consumers.
Amazon’s Dedication to Its Mission
Amazon is committed to promoting low prices, innovation and competition in retail.
The company vehemently disagrees with the FTC’s allegations and will contest the lawsuit, all while continuing to prioritize the Amazon customer experience and supporting businesses on its platform.
FTC Against Amazon Customer Experience and Prime
This monopoly lawsuit filed Sept. 26 comes after the FTC’s June 21 complaint against Amazon’s customer experience practices with enrolling and canceling Prime subscriptions.
Amazon defended its customer experience practices then, saying in a statement, “The truth is that customers love Prime, and by design we make it 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. While the absence of that normal course engagement is extremely disappointing, we look forward to proving our case in court.”
Here’s what the FTC alleges about the Amazon customer experience when it comes to Prime:
Amazon Customer Experience: Misleading Customers into Renewals
Amazon is accused of knowingly misleading millions of consumers into unwittingly enrolling in its Amazon Prime service. Specifically, this unwanted enrollment, referred to as “Nonconsensual Enrollment” or “Nonconsensual Enrollees,” is said to have been achieved through manipulative, coercive, or deceptive user-interface designs known as “dark patterns.” These designs tricked consumers into enrolling in automatically renewing Prime subscriptions. The issue of Nonconsensual Enrollment was well-known within Amazon, according to the FTC.
“Under substantial pressure from the Commission, Amazon changed its Iliad cancellation process in or about April 2023, shortly before the filing of this complaint,” FTC officials wrote in the complaint.
Prior to that point, there were only two ways to cancel a Prime subscription through Amazon, according to the FTC:
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Through the online labyrinthine cancellation flow known as the “Iliad Flow” on desktop and mobile devices
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By contacting customer service.
The Iliad Flow required consumers intending to cancel to navigate a four-page, six-click, 15-option cancellation process. In contrast, customers could enroll in Prime with one or two clicks.
Amazon Customer Experience: Manipulative Designs in the Checkout Enrollment and Iliad Flows
The manipulative designs (sometimes called dark patterns) Amazon uses, or has used, in its Prime enrollment flows and the Iliad Flow include the following elements:
- Forced Action. Amazon uses Forced Action in the version of its Prime enrollment flow, during which Amazon forces the consumer to choose whether to enroll in Prime before allowing the consumer to complete her purchase. Amazon also uses Forced Action in its Iliad Flow by forcing the consumer to proceed through multiple screens to cancel their subscription.
- Interface Interference. Amazon uses Interface Interference in its Prime checkout enrollment flow, most versions of which reveal the terms and conditions of Prime only once during the purchase process, and then only in a small, easy-to-miss font. Amazon also uses repetition and color to direct consumers’ attention to the words “free shipping” and away from Prime’s price, which leads some consumers to enroll without providing informed consent.
- Obstruction (“Roach Motel”). Amazon uses Obstruction, also known as Roach Motel, throughout its Prime checkout enrollment flows by making the option to decline enrollment difficult to locate. In fact, since at least 2018, Amazon has known that some consumers cannot find the less prominent “No Thank You” link to decline enrollment.
- Misdirection. Amazon uses Misdirection in its Prime checkout enrollment flow by presenting asymmetric choices that make it easier to enroll in Prime than not. Additionally, certain versions of Amazon’s checkout enrollment flow offer consumers only a less prominent blue link to decline Prime.
- Sneaking. “Sneaking” is a design element that consists of hiding or disguising relevant information, or delaying its disclosure. Amazon uses Sneaking by failing to clearly and conspicuously disclose Prime’s terms and conditions during its enrollment checkout flow, including its price and auto-renew attribute. Amazon also employs Sneaking by failing to show Prime’s price or its auto-renewal feature in the consumer’s cart.
- Confirmshaming. “Confirmshaming” is a design element that uses emotive wording around the disfavored option to guilt users into selecting the favored option. Amazon used confirmshaming, according to the FTC.
Amazon Customer Experience: Employees Pushed Leaders to Change
Some Amazon employees pushed the company executives responsible for Prime — including Neil Lindsay, Russell Grandinetti and Jamil Ghani — to address Nonconsensual Enrollment and make changes so that Amazon would not be tricking its customers.
However, Amazon and its leadership — including Lindsay, Grandinetti, and Ghani — slowed, avoided and even undid user experience changes that they knew would reduce Nonconsensual Enrollment because those changes would also negatively affect Amazon’s bottom line, according to the FTC.
Conclusion: Navigating the Murky Waters of Big Tech, Consumer Trust and the Amazon Customer Experience
The Federal Trade Commission’s lawsuits against Amazon bring into sharp focus the ongoing debates surrounding big tech, monopoly power and consumer rights. At the heart of these discussions is the Amazon customer experience. Renowned for its efficiency and innovation, this experience is being scrutinized to ascertain whether Amazon’s practices are truly in the best interest of its consumers or if they veer into manipulative territory.
While it’s yet to be determined how these legal proceedings will impact the future of Amazon and its relationship with users, one thing is certain: businesses and CX leaders should closely monitor the outcome. The repercussions could set a precedent for how companies shape their customer experiences in the digital age, emphasizing transparency, fairness and genuine value over short-term gains.
As the digital marketplace evolves, ensuring an ethical and customer-centric approach will remain paramount for brands looking to thrive and maintain trust in an increasingly discerning consumer landscape.
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