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Speaker 1: This is Bloomberg Law with June Brusso from Bloomberg Radio.

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Speaker 1: Please hold for a representative. Hi there, this is Matthias

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Speaker 1: with Spectrum Cable. Is this Brad Herman? Yeah? Hi? Hi?

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Speaker 1: And what can I help you with today? Mister Herman?

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Speaker 1: I just need to cancel my cable. I'm so sorry

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Speaker 1: to hear that before we begin. Would you like to

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Speaker 1: add a telephone landline to your current package for twelve

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Speaker 1: ninety nine a month? No, I'm good. I just need

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Speaker 1: to cancel the cable. I tried to do it online,

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Speaker 1: but they said I had to call. Of course, mister Herman.

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Speaker 2: We've all been through it, the time consuming hassles of

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Speaker 2: trying to cancel a membership, whether it's cable as in

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Speaker 2: this SNL skit, or a subscription to a newspaper, a magazine,

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Speaker 2: a streaming service. The list goes on and on. Well,

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Speaker 2: the Federal Raid Commission says Amazon not only duped consumers

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Speaker 2: into signing up for its Prime membership service, but also

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Speaker 2: deliberately made it hard to cancel Prime, with consumers having

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Speaker 2: to click through five pages on the desktop web store

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Speaker 2: or six on the mobile app in order to cancel Prime,

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Speaker 2: and the FTC has filed a lawsuit against the e

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Speaker 2: commerce giant in Washington State federal court using a twenty

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Speaker 2: ten consumer protection law designed to protect online shoppers. Joining

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Speaker 2: me is antitrust law expert Harry First, a professor at

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Speaker 2: NYU Law School, tell us about what the FTC claims

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Speaker 2: Amazon is doing wrong.

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Speaker 3: The easiest thing is just to read from the very

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Speaker 3: beginning of the complaint that Amazon filed in federal court

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Speaker 3: in Washington State of Washington, and it's basically an argument

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Speaker 3: that they've been engaged in this deceptive practice to sign

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Speaker 3: people up really without their knowing exactly what they're getting

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Speaker 3: into when they sign up for Prime, and then making

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Speaker 3: it really hard for them to get out of it.

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Speaker 3: So they start out and this is a little colorful language,

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Speaker 3: knowingly duped millions of consumers for years into unknowingly enrolling

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Speaker 3: in Prime and using manipulative, coercive, or deceptive interface design.

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Speaker 3: So they purposefully designed their platform, and this kind of

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Speaker 3: design has come to be known as dark patterns. It's

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Speaker 3: a nice label to put on things, maybe not so nice,

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Speaker 3: but certainly is descriptive dark patterns that trick consumers into

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Speaker 3: enrolling and automatically renewing subscriptions. So the idea is they've

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Speaker 3: basically designed the website in a way that it's not

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Speaker 3: so clear to many people what they've signed up for,

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Speaker 3: what their choices are, and then it's really hard to

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Speaker 3: get out of it. And they even referred to and

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Speaker 3: a lot of times companies put names on things that

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Speaker 3: later turn out to bite them that they wish they

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Speaker 3: had named them something like one or two, but instead

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Speaker 3: they named it the Iliad Flow, a reference to Homer's

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Speaker 3: epic poem about the Trojan Wars. And really, in the

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Speaker 3: Trojan Wars, the gods were constantly manipulating the humans, So

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Speaker 3: why would you name your process for getting out of

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Speaker 3: these subscriptions the Iliad Flow? So maybe not the best move,

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Speaker 3: but maybe an insight into how Amazon was seeing what

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Speaker 3: it was trying to do. And as we all know,

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Speaker 3: Amazon Prime is hugely profitable for Amazon. They've taken a

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Speaker 3: lot of revenue. I shouldn't say profitable because their arguments

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Speaker 3: about this, but it does generate a lot of revenue

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Speaker 3: and of course a lot of sales on the Amazon platform.

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Speaker 2: So Harry, let me ask you this because there are

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Speaker 2: so many times when I've tried to cancel a subscription

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Speaker 2: to something, and you have to go through sometimes several

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Speaker 2: different people before you can cancel. There are a lot

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Speaker 2: of subscriptions where you can't cancel online. You have to

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Speaker 2: call them up. So why is this any different?

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Speaker 3: Well, I mean, one answer is maybe it's not that different,

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Speaker 3: but that doesn't make it awful. The second answer maybe

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Speaker 3: is from the FTC's point of view, this particular practice

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Speaker 3: by Amazon does have a high economic impact. The third

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Speaker 3: maybe is that the Commission is now engaged in a

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Speaker 3: rulemaking proceeding to try to deal with this general problem

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Speaker 3: and to make it as easy to get out of

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Speaker 3: something as it was to get into something, to require

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Speaker 3: online marketplaces to do this. But this is an ongoing

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Speaker 3: process that they yet to adopt the rule, and you

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Speaker 3: know this will take time before assuming they adopt some

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Speaker 3: sort of a rule, before it ever takes effect, and

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Speaker 3: of course, as you might imagine, the industry will fight it.

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Speaker 3: So I guess an answer to your question, we've all

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Speaker 3: experienced this kind of effect of being very difficult to

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Speaker 3: get off things once you've gotten on them, and it's

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Speaker 3: become a serious problem with online commerce.

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Speaker 2: Now, this lawsuit is under a twenty ten consumer Protection law.

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Speaker 1: Is all of it.

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Speaker 2: Under that law.

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Speaker 3: Well, it's sort of an interesting way the Commission reaches this.

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Speaker 3: So the Commission has charged violation of two statutes. One

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Speaker 3: is the Federal Trade Commission Act, which was originally passed

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Speaker 3: in nineteen fourteen, and that prohibits unfair or deceptive acts

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Speaker 3: or practices in commerce, so you know, deceiving consumers basically.

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Speaker 3: In addition, there is this bill goes by the acronym

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Speaker 3: of Roska God help us with these acronyms, that was

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Speaker 3: passed in twenty ten, the Restore Online Shoppers Confidence Act,

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Speaker 3: which basically outlawed the negative option. You know, where you

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Speaker 3: buy things but the only way you can unbuy them

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Speaker 3: is by saying no. So you're constantly buying more unless

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Speaker 3: you say no. So there's an effort to undo that.

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Speaker 3: So the charges are technically filed under both statutes, and

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Speaker 3: you actually legally need both because it's the combination of

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Speaker 3: the two statutes that will give the FTC the power

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Speaker 3: to ask for civil penalties for these violations. So they

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Speaker 3: need both of them together, and that's what they've charged.

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Speaker 2: Amazon said the fgc's claims are false on the facts

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Speaker 2: and the law. The truth is that customers love Prime,

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Speaker 2: and by design, we make it clear and simple for

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Speaker 2: customers to both sign up for or cancel their Primest membership.

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Speaker 2: Pretty standard reply.

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Speaker 3: I guess my reaction as well. That's what they say.

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Speaker 3: And you know, a lot of the specifics in the complaint,

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Speaker 3: in fact, a huge amount have been redacted blacked out.

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Speaker 3: See if one wanted to read this eighty seven page

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Speaker 3: complaint from beginning to end, you really can't get a

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Speaker 3: full sense of what they've done and how purposeful their

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Speaker 3: behavior has been. So you know, that's yet to be seen.

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Speaker 3: The FTC, I think, wants to unredact the complaint. They

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Speaker 3: have to deal with Amazon whether they've got any privileged

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Speaker 3: documents that they're referring to. But you know, we'll see

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Speaker 3: in court. I mean, you can say people love Prime,

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Speaker 3: people love lots of things. That doesn't mean that everything

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Speaker 3: they do with regard to Prime is fine.

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Speaker 2: The agency previously used this law against Movie Pass into

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Speaker 2: its credit Karma and Ericsson's Internet phone service vantage over

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Speaker 2: subscription auto renewal and cancelation practices. Vontage paid one hundred

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Speaker 2: million to settle the suit, Credit Karma three million to

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Speaker 2: reimburse consumers but in this case with Amazon, according to

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Speaker 2: Bloomberg sources, Amazon was trying to reach a settlement with

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Speaker 2: the FTC but was rebuffed. Why do you think the

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Speaker 2: FTC wouldn't want to reach a settlement here?

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Speaker 3: Well, this is always hard to say. It may be

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Speaker 3: that the settlement offer the Commission thought was too low.

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Speaker 3: The law gives them the right to impose the civil

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Speaker 3: penalty of ten thousand dollars per violation, and a violation

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Speaker 3: is deemed to occur every day during which this behavior occurs,

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Speaker 3: So I don't know what numbers they're looking for. So

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Speaker 3: a standard explanation is Amazon's offer was too low.

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Speaker 2: You know.

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Speaker 3: Another explanation maybe is that the Commission is less willing

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Speaker 3: to settle things than previous commissions have been. So I

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Speaker 3: don't know how much that plays into it as well.

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Speaker 3: So you know, all that's yet to be seen, and

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Speaker 3: it doesn't mean the case won't settle in any event,

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Speaker 3: just because the Commission has filed its complaint. You know,

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Speaker 3: there may still be a settlement, and the Commission may

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Speaker 3: view it important to have a precedence set in court

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Speaker 3: as to what's proper behavior, so that also goes into it.

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Speaker 3: There is value to litigating, because that's the only way

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Speaker 3: you really create legal precedent. So there is a cost

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Speaker 3: to a government enforcer when it settles, even if it

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Speaker 3: looks like the deal's good.

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Speaker 2: Amazon changed its process for canceling Prime subscriptions in the

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Speaker 2: EU last summer after pressure from the European Commission and

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Speaker 2: national consumer watchdogs, and they introduced a simplified two click

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Speaker 2: process so it can be done. Why do you think

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Speaker 2: they held out in the US?

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Speaker 3: As I read this, I think they may have put

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Speaker 3: some changes in in the US, but that doesn't cure

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Speaker 3: past behavior, so I'm not certain. And since my Amazon

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Speaker 3: Prime seems to just renew all by itself, Oh my gosh,

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Speaker 3: I don't know, you know exactly what they've put into

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Speaker 3: effect in the United States, whatever it is, if it's

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Speaker 3: been done recently, Again, that doesn't cure pass violations. And

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Speaker 3: again it may be the Commission really feels it's time to,

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Speaker 3: you know, to have litigation that makes law. I'm not

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Speaker 3: sure if that's what's going on here, but that could

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Speaker 3: explain Europeans often are much more settlement prone than USA

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Speaker 3: any trust and forces.

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Speaker 2: This is the third suit the FTC has filed against

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Speaker 2: Amazon in the past month, the company agreed to pay

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Speaker 2: thirty point eight million to settle allegations it failed to

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Speaker 2: delete data about kids collected by its Alexa and to

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Speaker 2: settle allegations it's ring doorbells and cameras illegally spied on users.

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Speaker 2: So is the FTC sort of targeting Amazon?

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Speaker 3: Well, Amazon is a major company. Hard to know. Amazon

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Speaker 3: certainly will want to argue that it is a target

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Speaker 3: in the sense of being picked out unfairly. The other

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Speaker 3: side might be Amazon is what is it third by

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Speaker 3: market cap in the United States? Fourth, It's a huge

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Speaker 3: company in many many businesses. It's very important in many

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Speaker 3: ways to the US economy. You could argue it's particularly

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Speaker 3: appropriate for the Commission to be concerned about what it does.

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Speaker 3: Should it take up its time looking at, you know,

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Speaker 3: mattress sellers. I mean, what should it be doing with

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Speaker 3: the money that it has in its budget? So there

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Speaker 3: are two ways to cut that, Oh my god, we're

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Speaker 3: the target or oh thank god the Commission is engaged

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Speaker 3: in cost effective enforcement.

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Speaker 2: And how would you describe Lena Khan's tenure at the FTC.

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Speaker 3: I vacillate between I shouldn't feel this way because she's

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Speaker 3: an adult, you know, sort of feeling bad that she

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Speaker 3: was put into a very difficult position. She's clearly been

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Speaker 3: a lightning rod for conservative critics Wall Street Journal. You know,

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Speaker 3: it's it's not a day if they don't go after her.

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Speaker 3: And you know, some of it may be sort of

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Speaker 3: bad moves politically, I don't know. Some of it may

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Speaker 3: be just a very big agency that she's you know,

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Speaker 3: trying to manage. You know, she's appointed three years out

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Speaker 3: of law school, I mean, pointed chair, thank you very much,

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Speaker 3: President Biden. So it's a big job she's got. But

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Speaker 3: she has very strongly held and important views about competition

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Speaker 3: law and enforcement policy, and she has not hesitated to

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Speaker 3: write about them. She has important scholarship in the area.

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Speaker 3: So in some ways her being a lightning rod has

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Speaker 3: I'm sure not made her life the easiest. But she

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Speaker 3: also is a bit fearless. We'll wait for the motion

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Speaker 3: to disqualify her, but that will fail. And what we're

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Speaker 3: waiting for actually is the anti trust I was going

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Speaker 3: to say shoe to fall, but it's I don't know,

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Speaker 3: it's bigger than a shoe. The Commission is reportedly investigating,

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Speaker 3: you know, a major anti trust suit against Amazon. And

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Speaker 3: you know, money is one thing, but an any trust

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Speaker 3: suit that strikes it the way Amazon does business is

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Speaker 3: really quite a different challenge to Amazon. And whether they

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Speaker 3: ever bring that case or what that case looks like,

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Speaker 3: we have yet to see, but that's the one, you know,

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Speaker 3: I think we should be on the lookout for. These

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Speaker 3: are important. These consumer protection cases are important, but they

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Speaker 3: don't in the end, really strike at Amazon's business model

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Speaker 3: and whether it can continue to be both a platform

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Speaker 3: and a seller and constant buyer of businesses, you know,

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Speaker 3: how it can operate.

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Speaker 2: They would attempt to disqualify her from working on the

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Speaker 2: case or what would they discall?

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Speaker 3: No, that's the thing. See, the Commission has brought this

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Speaker 3: as a complaint in federal district court. There was a

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Speaker 3: motion to disqualify her in a prior case involving Meta's

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Speaker 3: acquisition of the virtual reality company Within, and the district

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Speaker 3: court judge said, well, she's acting as a prosecutor in

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Speaker 3: that case, not as a judge, whatever her views were originally.

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Speaker 3: Prosecutors aren't disqualified from being prosecutors because they held views before.

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Speaker 3: So that's the position that she's in in this case.

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Speaker 3: The Commission voted three commissioners to zero to bring the case.

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Speaker 3: So I don't know whether Amazon will even bother to file.

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Speaker 3: But you know, they had originally moved to disqualify from everything,

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Speaker 3: and that was emotion that got nowhere because it was

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Speaker 3: not in connection with any particular decision that the commission

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Speaker 3: had made. But you know, whether they'll choose that route

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Speaker 3: in this case, we'll see. It doesn't seem to me

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Speaker 3: to be illegally promising one, but as they say, hey,

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Speaker 3: you never know it.

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Speaker 2: Zohy's a pleasure to have you on the show. Harry.

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Speaker 2: That's Professor Harry First of NYU Law School. About one

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Speaker 2: hundred and sixty seven million Amazon shoppers had Prime memberships

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Speaker 2: as of March, according to market research firm Consumer Intelligence

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Speaker 2: Research Partners, and in the US, prime members spend about

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Speaker 2: twice as much on Amazon as non Prime members. Amazon's

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Speaker 2: revenue from subscription services, which is mostly from Prime memberships,

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Speaker 2: was nine point sixty six billion dollars in the quarter

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Speaker 2: that ended March thirty First. That's about seven point six

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Speaker 2: percent of its overall revenue for the period. And that's

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Speaker 2: it for this edition of The Bloomberg Law Show. Remember

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Speaker 2: you can always get the latest legal news on our

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Speaker 2: Bloomberg Law Podcast. You can find them on Apple Pop, Spotify,

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Speaker 2: and at www dot bloomberg dot com, slash podcast slash Law,

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Speaker 2: and remember to tune into The Bloomberg Law Show every

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Speaker 2: weeknight at ten pm Wall Street Time. I'm Jim Grosso

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Speaker 2: and you're listening to Bloomberg