Last year, the Federal Trade Commission sued Amazon, alleging that the company violated Section 5 of the FTC Act, as well as ROSCA (the Restore Online Shoppers Confidence Act), by tricking consumers into subscribing to Amazon Prime (by failing to disclose the material subscription terms clearly and conspicuously), by failing to obtain consumers' informed consent before signing them up, and by failing to provide a simple mechanism for consumers to cancel their subscriptions. 

Amazon moved to dismiss, arguing that it didn't violate the FTC Act or ROSCA.  Amazon said that it, in fact, did properly disclose the subscription terms and had obtained proper consent from consumers.  Amazon also argued that its cancellation process was simple because a reasonable user could navigate the cancellation process.  

The court denied the motion, allowing the case to proceed.  While this case is still in its early stages, there's a lot in this decision that online retailers should pay attention to – if they're hoping to stay out of the FTC's way.  

Background

Amazon Prime, of course, is Amazon's expedited free delivery service.  Here's how the FTC describes its concerns with how consumers sign up for Amazon Prime and then cancel. 

According to the complaint, when consumers go to make a purchase, Amazon offers consumers at least one opportunity to subscribe to Prime – such as through the use of the “Universal Prime Decision Page" (the "UPDP").  The UPDP interrupts consumers' online shopping experience, forcing consumers to make a choice at that moment whether to enroll. One example of the UPDP cited by the FTC has an orange button which says, “Get FREE Two-Day Delivery,” which is also placed above a gray box which says, “Enjoy Prime FREE for 30 days.”  Then, to the left of those buttons is some blue, hyperlinked text which reads, “No thanks, I do not want fast, free shipping.”  The FTC asserts that, “The contrast between an orange ‘double-stacked’ button to enroll in Prime and a blue link to decline prioritizes the enrollment option over the decline option and creates a visual imbalance.” 

The FTC then explains that, when a consumer clicks on the orange button, the consumer is instantly enrolled in Prime without getting a chance to confirm the purchase, even if the consumer ultimately didn't place an order on Amazon.  The FTC says that, in the small print below the button and the hyperlink, there's a disclaimer that discloses the monthly subscription price and the fact that the subscription continues until it is cancelled.

Finally, the FTC alleges that Prime's online cancellation process – called the “Iliad Flow” – is the primary method for cancelling a Prime membership.  As the FTC explains, “The Iliad Flow required consumers intending to cancel to navigate a four-page, six-click, fifteen-option cancellation process.”  And they couldn't even do that, the FTC says, until they located the “End Membership” link which was itself difficult to find. 

Express Informed Consent

First, the court considered the FTC's allegation that Amazon signed consumers up for Prime without obtaining their expressed informed consent.  

The FTC argued here that Amazon had failed to clearly and conspicuously disclose the subscription terms – thereby failing to properly obtain their consent – because (1) the context in which Amazon discloses the terms made it unlikely that consumers would look for, find, and understand the relevance of those terms, (2) the disclosures were generally in small print, below (or far below) the enrollment button, and were overshadowed by the text and graphics on the page, and (3) Amazon displayed the terms after obtaining consumers' billing information. 

Regarding the context of the disclosures, the FTC explained that, since Amazon embedded the enrollment flow in its product checkout process, it “made it unlikely many ordinary customers would notice Amazon had enrolled them in a Prime free trial or that the Prime free trial automatically converted to a paid membership after 30 days.”   The court determined, however, that, in this context, “a reasonable consumer could believe that they did not have a choice and the only path to move past the page to continue checking out was to click the prominent orange button, which registered them for Prime immediately.”  

Regarding the prominence of the disclosures, although Amazon argued that they were clear and conspicuous, the court determined that a reasonable consumer, trying to complete a purchase, “could miss the small print at the bottom of the page.”  

At the motion to dismiss stage, the court was not willing to say that, as a matter of law, Amazon had clearly and conspicuously disclosed the subscription terms.   The court also said that – regardless of the fact that Amazon may be dealing with repeat customers -- it couldn't ignore the plain language of ROSCA, which required that billing information be collected after the disclosures, not before. 

Considering whether Amazon had obtained consumers' express informed consent before enrolling them in Prime, the court said that the failure to disclose material terms clearly and conspicuously means that Amazon would not have obtained that consent.  The court indicated, however, that even in situations where terms may have been properly disclosed, Amazon may not have obtained it.  

Cancellation

The court also considered whether Amazon provided consumers with a simple mechanism to cancel.  At least at the motion to dismiss stage, the court said that it could not dismiss the case on the basis that Amazon's cancellation method was “simple."  The court noted that  Amazon's “Iliad Flow” cancellation process – which “required consumers to click six times and go through four screens” – did, in fact, complicate the cancellation process.  

FTC v. Amazon.com, 2024 WL 2723812 (W.D. Wa. 2024).