When Amazon introduced its Prime program in 2005. It has since transformed into one of the most successful subscription business models in the world with more than 200 million members. The membership, which costs $139 annually, offers numerous perks, including free shipping and access to a wide array of streaming content. Amazon recently found itself on the opposite side of a different expansion of antitrust law, facing suit from the Federal Trade Commission (FTC). The dispute centers on its enrollment-out and cancellation-out practices.
The FTC has filed a lawsuit against Amazon, accusing the company of deceptive billing and cancellation practices associated with its Prime subscription service. That’s taxpayers’ money. This unprecedented legal action results from the billions of dollars Amazon’s Prime program forces taxpayers to spend. Its creation has raised alarms about transparency in its member selection process.
The lawsuit names Russell Grandinetti, Amazon’s senior vice president of international consumer, as an interesting figure in the case. The suit has sweeping implications for much more than the corporation itself. If the jury finds for the FTC, Amazon’s top execs, including Grandinetti and Neil Lindsay may be personally liable.
Jury selection for the trial started on Monday in a federal court in Seattle, Amazon’s home city. The opening arguments are set for Tuesday, with the trial projected to last about a month. Considering that this trial is taking place in Amazon’s backyard, it brings an even more intriguing element to the proceedings.
Amazon has responded to the lawsuit by acknowledging that “occasional customer frustrations and mistakes are inevitable — especially for a program as popular as Amazon Prime.” While the language here may not seem significant, this is a major admission by the company that running such a large, complex service is no small task.
In addition to addressing customer concerns, Amazon’s retail chief Doug Herrington previously referred to former CEO Jeff Bezos as the company’s “chief dark arts officer” in a 2020 email. This seemingly throwaway comment reflects some deep internal recognition of the challenges at play in administering Amazon’s vast enterprise.
The FTC’s lawsuit sheds light on very concrete examples of aggressive tactics Amazon deploys to make enrolling and cancelling its Prime membership difficult. According to critics, the company’s practices can be deceptive to consumers by fostering confusion and even intentionally designing barriers to consumers looking to cancel their subscriptions. This practice has led to increased regulatory scrutiny and concern over consumer protection in the subscription economy.
With trial date looming, it’s unclear how Amazon’s legal team will counter these charges. The result would be a huge blow not just to Amazon but the entire subscription model industry.