Yesterday’s “lawsuit is the first time that the Federal Trade Commission” under Lina Khan’s chairmanship “has taken Amazon to court,” but this is not the first time Khan has taken Amazon to task. Khan branded herself an enemy of the online marketplace in her 2017 Yale Law Journal article “Amazon’s Antitrust Paradox,” in which she proposed “breaking up parts” of the company. Her past criticisms of Amazon raise concerns that the current case against the firm is not a disinterested one. But at least the facts of the case verify its legal and economic substance, right?
Not so much.
On Wednesday, the FTC sued Amazon “for enrolling consumers in Amazon Prime without consent and sabotaging their attempts to cancel.” In the filing, the FTC says that “one of Amazon’s primary business goals—and the primary business goal of Prime—is increasing subscriber numbers” (emphasis in the original). Go figure! To achieve this goal, according to the complaint, Amazon employs “repetition and color to direct consumers’ attention to the words ‘free shipping’ and away from Prime’s price.” Apparently, it’s a crime for firms to highlight the benefits of their offerings. Does the FTC have plans to target advertising itself?
The FTC alleges that Amazon “duped millions of consumers into unknowingly enrolling in Amazon Prime.” What fraction of Amazon’s 200 million Prime members feel “duped” by its offerings — two-day shipping, a cornucopia of media on Prime Video and Prime Music, groceries from Amazon-owned and -integrated Whole Foods, and a one-stop shop for discounted consumer goods? The heavily redacted version of the complaint available for public consumption doesn’t specify.
The FTC filing claims that “Amazon tricked and trapped people into recurring subscriptions,” but where is the deceit in notifying users of a subscription plan, the benefits thereof, and encouraging them to sign up? Amazon is a little pushy with its unreciprocated, repeated advances, but its full-throated advocacy of its product is a far cry from trickery and ensnarement.
In response, Amazon said that it “makes it clear and simple for customers to both sign up for or cancel their Prime membership.” In all fairness, this claim is disingenuous; it is decidedly easier to sign up than to cancel.
The complaint accurately reports that facilitating cancellation is not “the primary purpose of the Prime cancellation process.” The more subscribers Amazon has, the greater its profits, so it pushes people to stay subscribed by offering discounts and other benefits before outright cancellation. Still, as documented by Patrick Hedger, and confirmed by me — a college student who has initiated a Prime trial and successfully canceled it before the payment period — the canceling process takes “six clicks” and “under a minute” to perform.
Instead of targeting firms like Amazon that have earned large shares of the market by leveraging economics of scale, network effects, and integration to benefit the consumer, Khan should spend her time and taxpayers’ dollars filing complaints against firms whose behavior is actually fraudulent or contravenes the consumer-welfare standard.