FTC charges three Amazon executives in amended complaint over Prime

The Federal Trade Commission on Wednesday updated its complaint against Amazon for its “deceptive” Prime sign-up and cancellation processes, adding three senior executives as defendants.

Top Amazon executives overseeing Prime downplayed employee concerns about members of the popular subscription program being enrolled without their consent, the amended complaint alleges.

The filing names Russell Grandinetti, Amazon’s SVP of international consumer, and its Prime boss Jamil Ghani, as well as Neil Lindsay, a senior vice president who previously oversaw Prime’s technology and business operations before being tapped to lead health services at the company. Both Grandinetti and Lindsay serve on Amazon CEO Andy Jassy’s S-team, a tight-knit group of high-profile executives across many areas of the company’s businesses.

Previously redacted emails included in the updated complaint show that Amazon employees pushed the executives to address issues around customers being steered into signing up for Prime without their consent and to make changes so the company would not be “tricking” its customers.

In one exchange from July 2020, an employee wrote to Ghani: “An unknown $12.99 charge could mean grocery money for a family, gas to fill up a car, or just the last bit of money to make rent…Do we think that they should also [have] to call?”

The filing also includes new details about how Amazon executives weighed the potential negative impacts to its business if it were to “clarify” the Prime enrollment process. Amazon counts more than 200 million Prime members globally, and the program has generated billions of dollars for the company. Membership costs $139 a year and includes perks like free shipping and access to streaming services.

Subscription services revenue, which includes Prime memberships, totaled $9.8 billion in Amazon’s most recent quarterly earnings report.

Teams of Amazon researchers and designers had discovered the Prime enrollment process at checkout contained some aspects that were designed to “trick people into signing up,” the complaint states. These issues were also being studied as part of an internal initiative, code-named “Project Lucent.”

Amazon executives and employees met in 2018 about “Project Lucent,” where the primary objective was to discuss “how many Prime signups [is] Amazon . . . willing to lose in order to prevent unintended Prime Signup,” according to the complaint. 

At the meeting, representatives from the Prime organization opposed changes that would reduce subscription numbers because Amazon evaluates Prime’s performance “substantially” based on that metric, the filing states.

A draft memo compiled by members of the Prime unit acknowledged that design changes to the enrollment process would cause a “shock” to business performance.

Amazon spokesperson Tim Doyle called the FTC’s decision to add its executives as defendants “unwarranted under the facts and the law.”

“These leaders have worked tirelessly to make Prime an exceptional program that customers love, and they have our full support,” Doyle said in a statement. “To claim that their efforts were made in anything but the utmost good faith is unfounded and represents a radical departure from the FTC’s own standards for such claims.”

Doyle added that the complaint “is full of cherry-picked quotes that are taken out of context and mischaracterized by the agency.”

The FTC has on other occasions charged executives in complaints. For example, the agency named Meta CEO Mark Zuckerberg as a defendant in its suit seeking to block Meta’s acquisition of virtual reality fitness app maker Within Unlimited. However, the FTC later said it agreed to drop him as a defendant after Meta said Zuckerberg would not personally seek to buy the company. The agency also sought to hold Drizly’s CEO accountable in a settlement over alleged security failures.

The FTC is expected to file its separate, long-awaited antitrust suit against Amazon as soon as this month, according to multiple reports.

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