What the FTC’s new lawsuit against Amazon means for your business
Yesterday, the Federal Trade Commission (FTC), the federal government agency tasked with enforcing federal consumer protection and antitrust laws, filed a complaint against Amazon.com related to their wildly popular Amazon Prime membership.
In its complaint, the FTC alleges that Amazon violated the Federal Trademark Commission Act and the Restoring Online Shoppers’ Confidence Act (ROSCA) with respect to the enrollment and cancellation policies for Amazon Prime. The complaint states that Amazon used “dark patterns” which are manipulative, coercive, or deceptive user-interface designs” to trick users into signing up for a Prime membership without intending to do so. On the other hand, Amazon allegedly made it extremely difficult for Prime members to cancel their membership by requiring them to complete a 4 page, 6-click, 15-option cancellation process. This lawsuit may leave Amazon on the hook for millions if the courts find them in violation of the alleged infractions.
How is this relevant for your business?
Many brands offer customers subscription options as a part of their business model. Subscriptions are great because they provide some assurance in revenue for the brand with its monthly fees, and encourages customers to make repeat purchases to further drive up revenue. Although it may be a great option for brands, it is important to steer clear of violating consumer protection laws by offering subscription plans to consumers. For example, in 2022, the popular lingerie brand, Savage X Fenty, was required to pay $1.2 million to settle a California lawsuit with respect to its alleged lack of transparency in its pricing and terms of its Xtra VIP Membership. As a former Assistant Attorney General for the District of Columbia Office of Consumer Protection and federal government regulator, I can tell you firsthand that you do not want the government to launch an investigation into your business practices. Don’t let this be you!
How to stay compliant when offering Subscriptions
Though there are many laws to be cognizant of when running a fashion or e-commerce business, I’m focusing specifically on the requirements for ROSCA. Below are high-level tips on how you can remain compliant with ROSCA when incorporating subscriptions into your business model:
Clearly and conspicuously disclose all material terms of the transaction before obtaining a customer’s billing information.
Obtain the customer’s express informed consent before making the charge.
Provide a simple mechanism to stop recurring charges.
You can review ROSCA and all of its requirements here.
Was this helpful? Have questions about whether your business is legally compliant with ROSCA or other government regulations? Schedule a 1-on-1 Strategy Session with me and we can discuss how we can work together to take your business to the next level!
