Prime Peril: Judge Sides with FTC in Deceptive Sign-Up Lawsuit Against Amazon

A Seattle judge just threw a wrench into Amazon's plans to dismiss a lawsuit filed by the Federal Trade Commission (FTC). The FTC alleges that Amazon uses deceptive tactics to lure customers into Prime memberships and then makes canceling those memberships a frustrating ordeal.

Cracking Down on "Sneaky Signups"

The FTC lawsuit, filed in June 2023 by Chair Lina Khan, centers on a law called the Restore Online Shopper's Confidence Act (ROSCA). ROSCA targets a marketing tactic known as "negative option" marketing. Imagine signing up for a service automatically unless you specifically opt-out – that's negative option marketing. 

The FTC believes Amazon uses a sneakier version of this for Prime memberships. They allege Amazon's signup process is confusing, inadvertently enrolling customers in Prime and then making it difficult for them to cancel.

For instance, the FTC might argue that confusingly worded free trial offers or hidden cancellation buttons could violate ROSCA. Legal Newsline reported that the FTC lawsuit detailed how some customers abandoned the cancellation process after believing they had completed it, only to be charged for Prime memberships later. 

This, according to the FTC, suggests Amazon's cancellation process might be deliberately designed to be frustrating, calling out the e-commerce giant for its alleged "manipulative, coercive or deceptive user-interface designs known as 'dark patterns' to trick consumers into enrolling in automatically renewing Prime subscriptions.”

Amazon Fights Back, But Judge Sides with FTC

Amazon, unsurprisingly, pushed back against the FTC's claims. They argued that the FTC was misinterpreting ROSCA and attempting to establish a new legal precedent. The company also claimed the FTC was unfairly targeting them, pointing out that other retailers might employ similar practices. Amazon argued "the FTC had never before used ROSCA this way," and that the FTC was "inventing a new legal standard," Reuters reports.

However, Judge John Chun, wasn't convinced by Amazon's arguments. He pointed to the FTC's claims that customers often gave up on canceling after thinking they'd done it, suggesting a deliberate design on Amazon's part. Judge Chun further noted that Amazon, as a major online retailer with a subscription service, should be well aware of consumer protection laws like ROSCA, writing that "[an agency] does not waive its right to enforce a statute when it has not done so in the past."

The FTC vs. Amazon: A Growing Rivalry

This lawsuit is just the latest chapter in the ongoing battle between Amazon and the FTC under Chair Lina Khan, a vocal critic of the company's business practices. The FTC has also filed a separate lawsuit against Amazon alleging anti-competitive practices related to its third-party seller pricing model. That case is scheduled for trial in October 2026.

The Fate of Prime Hangs in the Balance

The FTC's lawsuit against Amazon Prime is scheduled for a non-jury trial in February 2025. If the FTC prevails, it could force Amazon to completely revamp how they sign people up for Prime and make canceling memberships a more user-friendly process. This could potentially impact millions of Prime members.