Stock Market

Amazon Lawsuit Puts U.S. Retailers’ Exclusive Programs in the Spotlight

In the midst of legal action against Inc (NASDAQ:AMZN), other major U.S. retailers are also being accused of employing deceptive tactics to promote their membership programs. Retail giants like Walmart (NYSE:WMT) and Best Buy (NYSE:BBY), as well as specialty retailers such as Savage X Fenty and Adore Me, are now facing increased scrutiny over their subscription offerings.

These programs typically charge customers monthly fees in exchange for benefits like free delivery, unlimited tech support, or discounts on merchandise. According to a survey conducted by Euromonitor Inc, 30% of Americans were enrolled in a subscription service in 2022, a notable increase from the 20% reported in 2017.

The U.S. Federal Trade Commission (FTC) has targeted Amazon with a lawsuit filed in Seattle, accusing the e-commerce giant of misleading millions of consumers into purchasing Prime subscriptions. Prime members in the United States pay $139 annually for free delivery and contribute significantly to Amazon’s sales volume.

According to the FTC, Amazon intentionally complicated the cancellation process for Prime subscribers who wished to end their membership, a claim made in the complaint. However, Amazon made significant changes to its Prime cancellation process for certain customers before the lawsuit was filed. The company stated that it adjusted the process to comply with consumer protection rules in the European Union in 2022 and made further alterations in the United States in early 2023, ensuring compliance with applicable laws.

Legal experts, including William Kovacic, a professor at George Washington University Law School and former FTC commissioner, believe that the Amazon lawsuit aims to set a precedent, prompt changes in Amazon’s practices, and establish standards for the entire industry. Kathleen Benway, a former chief of staff at the FTC’s Bureau of Consumer Protection, warned that retailers should be alarmed by the FTC’s action against practices such as auto-renewal terms and multi-step cancellation policies, which have become widespread in online subscription platforms. She emphasized that this case represents the first court examination of the adequacy of such disclosures and practices that have now become commonplace.

Consumer protection nonprofit Truth in Advertising previously filed a lawsuit against Savage X Fenty and its parent company TechStyle, as well as Adore Me, raising concerns about their automatic enrollment techniques and undisclosed terms and conditions. Savage X Fenty attracted shoppers with VIP member discounts but enrolled them in its membership program without fully disclosing the terms. The nonprofit alleged that customers were required to opt out of the program to avoid monthly charges and that the credits offered could only be applied to purchases over $49.95. Savage X Fenty settled with California’s state government for $1.2 million and implemented changes to its website, while Adore Me reached a $2.35 million settlement with multiple states.

Walmart introduced its Walmart+ subscription in 2020, boasting 20 million subscribers as of May, and offering free grocery delivery for a $98 annual fee. In a lawsuit filed in Michigan, a shopper claimed that Walmart employed deceptive subscription practices, including automatically charging customers after a free trial, creating obstacles for canceling subscriptions, and failing to honor cancellation requests. The lawsuit was later withdrawn, and no further details were provided.

Best Buy launched a subscription program in 2021, providing tech support and product discounts. In response to a class action lawsuit, a customer alleged that after purchasing a TV online, they were unknowingly enrolled in two subscription programs—a Total Tech Support Monthly Membership for $19.99 per month and an antivirus program for $2.99 per month—with no option to cancel either membership online. While the California district court referred the case to private arbitration, it acknowledged that the disclosure above the purchase button was clearly visible. Best Buy declined to

comment on the lawsuit.

As the legal scrutiny intensifies, the outcome of the Amazon lawsuit and subsequent cases against retailers will likely shape the landscape of membership programs, impacting disclosure practices, cancellation policies, and consumer protection standards in the online subscription industry.

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button