United States: FTC Adds Three Executives To "Dark Patterns" Complaint Over Online Subscription And Cancellation Practices

While the FTC's recent antitrust suit against Amazon has attracted much attention, the commission's earlier filed consumer protection case against Amazon provides key takeaways for executives. On September 20, 2023, the Federal Trade Commission (FTC) amended its complaint against Amazon.com Inc. to add three Amazon executives as individual defendants. The complaint alleges that Amazon used "dark patterns" to cause consumers to unknowingly enroll in Amazon Prime subscriptions and also made cancelling the subscription difficult. The FTC claims that these actions constituted an unfair or deceptive act or practice in violation of Section 5 of the FTC Act and the Restore Online Shoppers' Confidence Act. The initial complaint, which was filed in June, named only Amazon.

Key Takeaways

• The amended complaint may signal an increased focus at the FTC regarding individual accountability for executives directly involved in wrongdoing.
• The potential consequences for executives of being named in an FTC action include civil penalties, other forms of monetary relief and a permanent injunction.

The FTC's Allegations and the Relief Sought

The three executives are all senior vice presidents overseeing Prime, one of whom is now on Amazon's leadership team. The amended complaint alleges that all three executives knew that customers were unknowingly enrolling in Prime and that Amazon had designed a "labyrinthine" cancellation process to prevent subscribers from cancelling. Further, the FTC claims, all three executives slowed or rejected internal attempts to clarify the enrollment and cancellation processes.

The amended complaint supports these allegations with internal emails, memoranda and presentations, which identify unknowing enrollment and difficult cancellations as known issues. Some of these internal documents were merely approved or received by the three executives, while others are the executives' own communications. Included among the communications were emails from Amazon employees to the executives that raised concerns about the Prime enrollment and cancellation processes.

The amended complaint also alleges that Amazon and the three executives attempted to conceal documents by misusing privilege designations, for example by adding the phrase "seeking counsel" to mass correspondence that did not request legal advice. The FTC claims that this practice shows that the defendants understood that they were likely to be investigated.

Significance of FTC's Naming Amazon Executives

The amended complaint adding Amazon executives in key leadership roles may signal an increased focus at the agency regarding individual accountability.

In consumer protection cases such as this one, it is not unusual for the FTC to name individuals, as well as companies, as defendants. However, such cases typically involve small companies in which the named executive is the sole proprietor or "alter ego" of the defendant business.

In recent years, however, the commission has begun naming executives of larger companies.

In 2022, the FTC sued both Drizly LLC and its CEO for a data breach. That case ended in a consent order, under which the CEO is required to implement information security training if he is a majority owner, CEO or senior officer with security responsibilities at any company that collects information on more than 25,000 people.

In naming the CEO as a defendant in that case, the FTC appeared to be sending a message of deterrence, rather than seeking to hold accountable individual executives for their direct involvement in the allegedly illegal conduct. Indeed, former FTC Commissioner Rohit Chopra and Commissioner Rebecca Slaughter have supported naming individuals from larger companies, highlighting it as a method of deterrence. And in the Drizly case, former FTC Commissioner Christine Wilson argued that because CEOs generally have little knowledge of or involvement in challenged practices, the CEO should not be held individually liable. FTC Chair Lina Khan disagreed, stating that "overseeing a big company is not an excuse to subordinate legal duties in favor of other priorities."

But the Amazon executives named in the amended complaint were allegedly active participants in the illegal conduct. According to the FTC, the three executives occupy positions that gave them the authority to stop the challenged practices; rather than stop these practices, they allowed them to continue. And the evidence includes these executives' own correspondence furthering the allegedly illegal conduct.

Conclusion

By naming three executives who had responsibility for the Prime program, the FTC may be signaling that executives who actively participate in illegal conduct—even in large companies—run the risk of being named as defendants in the FTC's consumer protection actions. The consequences for executives of being named in an FTC action may be significant. In the Amazon case, the company and the individual defendants may be liable for civil penalties of up to $50,120 for each violation, and potentially other forms of monetary relief. In addition, the executives may be subject to a permanent injunction.

Executives of all companies that deal with consumers need to be aware that the FTC may seek to hold them individually liable for their actions in furthering unfair or deceptive acts or practices by the company.

For More Information

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