Attorney General Kris Mayes announced today that the state of Arizona has initiated legal proceedings against Amazon, alleging the e-commerce behemoth of unfair and deceptive business practices. The accusations are grounded in the Arizona Consumer Fraud Act and the Arizona Uniform State Antitrust Act.
"Amazon's anti-competitive and monopolistic practices have artificially inflated prices for Arizona consumers and harmed smaller third-party retailers that rely on its platform," Attorney General Mayes stated. "Amazon must be held accountable for these violations of our state laws. No matter how big and powerful, all businesses must play by the same rules and follow the same laws as everyone else."
The first lawsuit centers on Amazon Prime's cancellation process, which is allegedly intentionally confusing and misleading, a strategy internally referred to as Project Iliad. The suit alleges that Amazon’s cancellation process manipulates users with a complex interface filled with skewed wording, confusing choices, and repeated nudging. These methods, known as “dark patterns,” exploit cognitive biases to influence consumer choices.
These tactics include using misdirection to make cancellation difficult through misleading wording and graphics, emphasizing the benefits lost upon cancellation to dissuade users from leaving the service. Internal documents reportedly show that Project Iliad succeeded in reducing Prime cancellations by 14%.
The second lawsuit takes aim at Amazon's Buy Box algorithm, which determines which offer for a given product is made available via the “Buy Now” or “Add to Cart” buttons. Despite Amazon portraying itself as a cost-conscious retailer claiming that the Buy Box algorithm chooses offers most consumers would prefer, the lawsuit alleges otherwise.
The suit contends that the Buy Box algorithm is biased toward offers that maximize Amazon’s profits, often favoring its own products or those of Fulfillment by Amazon (FBA) sellers over better non-FBA options.
Sellers who use FBA are also required to pay Amazon additional fees for warehousing products, packing and labeling items for shipping, and delivering them to customers, even if there are cheaper and better options for all of those services. These practices not only mislead consumers but also unfairly impact smaller third-party sellers.
Furthermore, the lawsuit accuses Amazon of maintaining its market dominance unfairly by enforcing unlawful price parity agreements through its Business Services Agreement. These agreements allegedly prevent third-party sellers from offering lower prices outside of Amazon, stifling competition against Amazon as a retailer and marketplace provider – ultimately inflating prices for Arizona consumers.
"Arizona consumers deserve to be treated fairly and without deception by big corporations like Amazon, and small businesses deserve a level playing field,” Attorney General Mayes concluded. “Amazon should change its business practices to comply with Arizona law."