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FTC keeps its secrets from Amazon in Prime lawsuit

LEGAL NEWSLINE

Thursday, November 21, 2024

FTC keeps its secrets from Amazon in Prime lawsuit

Federal Gov
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Federal Trade Commission Chair Lina M. Khan | Federal Trade Commission

SEATTLE (Legal Newsline) - The Federal Trade Commission will not have to hand over internal documents that show how it has interpreted a federal online shopping law through the years, as a federal judge has declined Amazon's request for access.

The FTC's lawsuit against the retail giant in Seattle federal court has made far fewer headlines than the antitrust case it faces, but stakes are still high as the FTC and chair Lina Khan allege Amazon tricks shoppers into enrolling in its Prime program.

The FTC alleges violations of the Restore Online Shoppers' Confidence Act, a 2010 law that targets so-called "negative option" transactions. Amazon has said the FTC had never before used ROSCA in this way, hoping memos through the years would show it was not on "fair notice" that it could face ROSCA liabilities.

Judge John Chun, a President Biden-appointee, denied its motion on Aug. 22. He cited a previous case from Texas that found "regulated parties have no access to an agency's internal deliberations; thus, these communications should have no bearing upon whether the agency has given fair notice."

Chun has already denied Amazon's motion to dismiss the case, which is getting bigger and more expensive to defend. On Aug. 28, the FTC asked Chun to permit it to conduct depositions of 35 witnesses - 25 more than the maximum allowed.

In the antitrust case, the same court let Amazon depose 150 witnesses.

"In the spirit of compromise, Amazon already consented to increase the limit to 16 identified depositions, and made it clear it is willing to negotiate a larger number if the FTC will identify the additional deponents and the non-duplicative reasons their testimony is sought," attorneys for Amazon wrote.

"But in response to Amazon, and in its motion to the Court, the FTC refuses to do so.

"After working on this case for more than three years, receiving hundreds of thousands of documents, and obtaining testimony from 35 investigational hearing, the FTC is doubtlessly in a position to identify the witnesses it feels it needs to examine and explain with particularity the reasons why - as the law requires."

It would be understandable for Amazon not to expect help from the bench, given recent rulings. Chun's Aug. 22 order found him unpersuaded to dig into why the FTC is now applying ROSCA in the manner it does now, more than a decade after it was signed into law.

Amazon sought:

-FTC internal memos reflecting the agency's interpretation over time of ROSCA, negative options and "dark patterns";

-Documents relating to the FTC's ongoing negative option rulemaking that were created after June 21, the day it sued Amazon;

-Documents relating to the FTC's 2009 report "Negative Options - A Report by the staff of the FTC's Division of Enforcement" and a related workshop; and

-Documents relating to FTC press releases about the case.

Part of Amazon's defense is the FTC did not provide fair notice about what Amazon says are changing requirements under ROSCA and that the company lacked "actual knowledge" that its practices could be construed as illegal.

"Here, where the FTC both claims that the operative standards are clear enough to support its claims while publicly asserting they are ambiguous and in need of revision, the imperative of uncovering these plainly relevant and responsive materials is particularly acute," Amazon argued.

The lawsuit alleges Amazon tricks shoppers into enrolling in Prime then makes it difficult for them to cancel. Chair Khan is Amazon's Public Enemy No. 1. Her long-planned antitrust lawsuit targets Amazon's policy that third-party vendors can't charge less for their products elsewhere, even though Amazon gets a percentage of their sales made on its site.

Chun is also handling that case. Khan, whose anti-business efforts include a ban on noncompete employment clauses that has been blocked by multiple courts, has admitted she still shops on Amazon.

Amazon says she is attacking the "very essence of competition." She's also pushing antitrust claims against Facebook owner Meta, though that company says the FTC can't even show what "market" has been manipulated.

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