SEATTLE (Legal Newsline) - The Federal Trade Commission can continue with one front of its war on Amazon, a Seattle federal judge has ruled in a lawsuit alleging it tricks shoppers into enrolling in its Prime program.
Amazon's chief nemesis, FTC Chair Lina Khan, sued the company last year, claiming the Prime program is also difficult for consumers to cancel. She alleged violation of the Restore Online Shopper' Confidence Act, a 2010 law that targets so-called "negative option" transactions.
Amazon's motion to dismiss said he FTC had never before used ROSCA this way, writing Feb. 15 in a motion to dismiss that the FTC is "inventing a new legal standard that is neither supported by ROSCA nor found in the FTC's past guidance."
Judge John Chun, a President Biden-appointee, rejected that motion on May 28. He noted the amended complaint's allegations that customers abandoned the cancellation process after assuming they had completed it and that Amazon knew.
"A reasonable company in Amazon's position - 'one of the worlds largest retailers' running a subscription service that offers auto-renewing subscriptions - would be aware that state and federal laws, including ROSCA, regulate negative option marketing and require that material terms be clearly and conspicuously disclosed and that they must obtain express informed consent before charging consumers," he wrote.
Regarding Amazon's claims that the FTC is singling it out to use ROSCA in a new way without notifying it first, Chun wrote an agency does not waive its right to enforce a statute when it has not done so in the past.
"THAT the FTC has not brought civil actions against all individuals who the defendants argue engage in similar practices does not mean that this enforcement action violates the individual defendants' right to due process," he wrote.
"Despite how the FTC chooses to label its theory of the case, the Court merely evaluates whether the allegations state a claim under the language of ROSCA and the FTC Act."
Amazon is also fighting Khan in a lawsuit alleging its pricing model, which keeps prices offered by third-party vendors as low on Amazon as those offered on other platforms, is anticompetitive.
Khan has admitted she buys diapers on Amazon and in her career-making 2017 academic article attacking Amazon’s practices, she acknowledged it would be necessary to “revise antitrust law” to go after Amazon.
The FTC claims Amazon has cowed the entire retail sector into charging higher prices by threatening the 560,000 merchants who sell goods on its site with punishment if they offer lower prices anywhere else. The government alleges a variety of illegal tactics including forcing third-party sellers to use its fulfillment and advertising services to increase their ranking in search results.
Those vendors then pass through Amazon’s higher costs to consumers, the government says. Amazon attacked those claims as fanciful.
First, the FTC says Amazon has monopolized the “online superstore” market, defined as the online stores of Amazon, Target, Walmart and perhaps a few more unspecified retailers. Amazon said it was implausible to claim that consumers don’t shop for lower-priced TVs on Bestbuy.com because it doesn’t also offer shoes and cosmetics, and even less plausible they wouldn’t buy a cheaper TV in a bricks-and-mortar store.