By Dave Lee / Bloomberg Opinion
The Federal Trade Commission lawsuit against Amazon seeks to punish the company for what the regulator says was a brazen manipulation of users, tricking them into signing up for expensive Amazon Prime memberships without their consent. Once users were enrolled, Amazon is accused of making it unreasonably difficult for them to back out.
Sound familiar? You could replace “Amazon” with many subscription-based businesses these days. The lawsuit, along with other regulatory efforts by the FTC, should serve as a warning to all of them: The game might soon be up.
FTC Chair Lina Khan accused Amazon of using deceptive practices to lock shoppers in to signing up for Prime, the company’s $139 per year subscription service. In a yearslong effort, a filing alleged, Amazon had “knowingly duped millions of consumers” into signing up by methods such as hiding pricing terms at the bottom of pages and adding bright buttons for “free” delivery that didn’t make it clear that clicking on them would enroll the user in a subscription plan.
When customers tried to cancel, Amazon is said to have made it a rigamarole. “The primary purpose of its Prime cancellation process was not to enable subscribers to cancel, but to stop them,” the FTC alleges. The process was so lengthy, the filing said, that it was known within Amazon as “Iliad.”
As companies clamor for recurring revenue, the kinds of maneuvers outlined by the FTC have become a daily tripwire for users of the internet. Called “dark patterns,” they are visual or functional tweaks designed to manipulate our behavior, whether signing up for auto-renewals, engaging with an ad or panic-booking a hotel (“31 people are looking at this room!”. No, they’re not).
Even if you aren’t familiar with the term, you are likely learning how to avoid some of the more common dark pattern practices. You may, like me, have a calendar filled with “Cancel! Cancel!” reminders on certain days to make sure a free trial doesn’t slip into a costly commitment. Perhaps you instinctively scour pages for the coy “no thanks” option when checking out. You might have become used to dodging certain app prompts, such as Uber’s persistent demands to sign up to its Uber One plan.
Fortunately, the FTC under Khan doesn’t feel the onus should be on consumers to outwit the manipulators. And for when we do make “mistakes,” it believes canceling should be as simple as it was to sign up.
That’s the basis of the FTC’s proposed Negative Option Rule. For customers who want to cancel services, companies would have to ask permission before attempting to show them offers that might tempt them to stay. Companies must also warn customers when an annual renewal is about to hit someone’s bank account.
According to comments submitted to the FTC, opponents of the proposal say existing rules — such as the ones Amazon is being sued under — go far enough. They warn that any further clamping down would, you guessed it, stifle innovation. Chris Hoofnagle, a Berkeley professor who studies dark patterns, argued that the only innovation we would risk stifling would be the inventive ways companies are coming up with to circumvent the existing rules.
The FTC says it receives thousands of complaints about dark patterns every year. Clearly, that is only a tiny fraction of those affected. Lawsuits like the one against Amazon go some way toward deterring companies from behaving badly, but only strengthened regulation — and a more effective means of reporting bad actors — will succeed in stemming the problem. (The FTC noted in its suit that Amazon has made some changes since regulators launched their investigation.)
The suit is the latest in a string of cases brought by the agency that seek to challenge corporate power. Khan, a Biden appointee, first gained notice as a young legal scholar who questioned Amazon’s market influence.
If the case reaches a courtroom, it could be embarrassing for a company that claims to be “customer-obsessed” and always acts in users’ best interests.
Prime membership is the linchpin of Amazon’s business model, boosting not just e-commerce — Prime members spend more and shop more often than non-Prime members — but also other divisions such as entertainment, groceries and health care. Relative to other subscriptions, such as Netflix, few people would say you don’t get a lot for your money. Amazon shouldn’t need to resort to such techniques. (“The FTC’s claims are false on the facts and the law,” Amazon said in a statement. “[B]y design we make it clear and simple for customers to both sign up for or cancel their Prime membership.”)
In any context, preying on human fallibility is no way to run an honest business. While Amazon feels it is being unfairly targeted by an FTC with a vendetta, Khan is right to make an example out of Prime as she seeks to tackle the wider scourge of dark patterns within the services we use today.
Dave Lee is Bloomberg Opinion’s U.S. technology columnist.
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