Amazon Sued by FTC

The FTC sues Amazon for violating consumer protection laws

The Federal Trade Commission sued Amazon (NASDAQ:NASDAQ:) in federal court in Washington state on Wednesday for violating consumer protection laws. The lawsuit alleges that Amazon’s website knowingly “misled” millions of consumers into signing up for Prime and then made it difficult for them to cancel.

Prime is Amazon’s paid subscription service that includes faster delivery and access to streaming video, songs, and other features. The service costs $139 per year.

Amazon used manipulative, coercive or deceptive user interface designs known as “dark patterns” to trick consumers into signing up for auto-renewing Prime subscriptions, the FTC said. Then knowingly complicated the cancellation process for Prime subscribers looking to end their membership.

“Amazon tricked and trapped people into recurring subscriptions without their consent, which not only frustrated users but also cost them a lot of money,” said FTC Chairman Lina M. Khan. “These manipulative tactics hurt both consumers and law-abiding businesses. The FTC will continue to vigorously protect Americans from “dark employers” and other unfair or deceptive practices in digital marketplaces.”

BofA reiterated a Buy rating on Amazon because it believes demand was expected, adding that Amazon stock’s reaction to the announcement shows the Street isn’t overly concerned. They noted:

In our opinion, the lawsuit potentially indicates that the FTC does not have something potentially more impactful to pursue, such as pricing policies, 3P fees, or 1P product competition.

Shares were up 1.25% for the week.