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The FTC sues Amazon over hard-to-cancel Prime memberships

MARY LOUISE KELLY, HOST:

Amazon is facing a federal lawsuit over Prime memberships. The Federal Trade Commission is accusing the tech giant of tricking people into buying Prime subscriptions and making them purposefully hard to cancel. I want to note Amazon is among NPR's financial supporters, but we cover them like any other company. I will also note NPR's Alina Selyukh is here to tell us more about today's lawsuit. Hey, Alina.

ALINA SELYUKH, BYLINE: Hello, hello.

KELLY: OK, so what exactly are regulators accusing Amazon of doing?

SELYUKH: So they say Amazon for years used, quote, "manipulative, coercive or deceptive tactics," designing its platform to get people to sign up for Prime even if they maybe didn't fully want to. And then these subscriptions would automatically renew costing people $15 a month or $139 a year. And, you know, Prime - it's kind of the heart of Amazon's retail business. Prime members shop more. They spend more. As of two years ago, Amazon had 200 million Prime subscribers globally. And this lawsuit posits some of them maybe were gained in sneaky ways.

KELLY: Sneaky ways like what?

SELYUKH: So regulators call it dark patterns, which is a dramatic industry term. One example is making it hard to compare your options. So, for example, the FTC says Amazon's website would bombard shoppers with ways to sign up for Prime, but options to shop without Prime would be hard to spot. Or regulators say there would be a button that you have to click to complete a purchase, but it would obscure the fact that clicking it also signs you up for Prime.

And I want to mention the other main bit of the FTC's lawsuit. It's about canceling Prime. The agency says Amazon built the cancellation process with a focus on discouraging people from leaving. It's a lot of pages. It's a lot of clicks. Internally, the process was apparently called the Iliad Flow.

KELLY: The Iliad Flow - like, Greek epic, Trojan War kind of Iliad Flow?

SELYUKH: Yes, exactly.

KELLY: OK (laughter).

SELYUKH: Hundreds of pages long, which - to the FTC, that makes it clear maybe Amazon wanted cancellations to be quite laborious. The FTC says Amazon began changing some of these things as the federal investigation got underway, but violations continue.

KELLY: What is Amazon saying to all of this?

SELYUKH: You know, it appears the lawsuit caught Amazon by surprise. In its press statements, the company said it was in talks with FTC staff and expected to meet with the commissioners before the lawsuit landed. And overall, Amazon called FTC's claims, quote, "false on the facts and the law."

KELLY: So step back and just answer for me, how big a deal is this case likely to prove to be for Amazon?

SELYUKH: Yeah, so this is the first FTC lawsuit against Amazon under the agency's firebrand chair, Lina Khan. She arrived as a young legal star in competition and monopoly, and she's most famous for her law school paper that was called "Amazon's Antitrust Paradox." Because of that, Amazon actually even tried to have Khan recuse herself from FTC cases about the company. Now she's bringing this lawsuit. And also, companies often push to settle regulatory cases. Recently, Amazon itself agreed to pay $30 million to settle alleged privacy violations without admitting wrongdoing. But this case is before a federal court in Seattle now - might become the flashpoint of the FTC's scrutiny of Amazon.

KELLY: Thanks, Alina.

SELYUKH: Thank you.

KELLY: NPR's Alina Selyukh.

(SOUNDBITE OF MUSIC) Transcript provided by NPR, Copyright NPR.

Alina Selyukh is a business correspondent at NPR, where she follows the path of the retail and tech industries, tracking how America's biggest companies are influencing the way we spend our time, money, and energy.