Amazon lawsuit scrutinizes US firms’ members-only programs. Amazon.com Inc. (AMZN.O) isn’t the only U.S. retailer accused of fraudulent membership sales.
Subscription programs at Walmart (WMT.N), Best Buy (BBY.N), Savage X Fenty, and Adore Me are under examination.
Many charge monthly fees for free shipping, tech support, and discounts. Euromonitor Inc. surveyed 37,720 Americans in 2022 and found that 30% were subscribed to a service, up from 20% in 2017.
The Seattle Federal Trade Commission sued Amazon. The FTC charged Amazon with deceiving “millions of consumers” into buying Prime subscriptions. Amazon’s sales are driven by U.S. Prime members’ $139 annual fee for free delivery.
Amazon “knowingly complicated the cancellation process for Prime subscribers who sought to end their membership,” the FTC complained. The complaint states that Amazon “substantially revamped its Prime cancellation process” for some users before the litigation.
Amazon, which began Prime in 2005 and has 170 million U.S. subscribers, will defend itself in court. Amazon revised its “two clicks” Prime cancellation process in Europe last year and in the U.S. in early 2023 to comply with E.U. consumer protection laws. Amazon said the old and new canceling processes follow the law.
William Kovacic, a professor at George Washington University Law School and former FTC commissioner, said the Amazon action aims “to make a point,” reform Amazon’s policies, and “develop a template for standards for the entire sector.”
Kathleen Benway, a former FTC Bureau of Consumer Protection chief of staff, said retailers should be “very concerned” that the FTC is taking action against auto-renewal terms, multi-step cancellation policies, and other common practices on online subscription platforms.
“This is the first time a court is looking at the adequacy of these types of disclosures and other practices that have become pretty common now,” she added.
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