You knew the day was coming when Federal Trade Commission (FTC) chair Lina Khan would find a way to litigate against Amazon. That day was June 21, when the hammer came down on the world’s fastest growing company when the federal agency said Amazon illegally induced consumers to sign up for its paid “Prime” subscription service and then impeded them if they wanted to cancel.
The FTC accused Amazon of duping millions of consumers into subscribing to “Prime” by utilizing “manipulative, coercive or deceptive” tactics. The suit, which was filed in U.S district Court for the Western District of Washington (which covers the Seattle area, Amazon’s headquarters) also noted that when consumers wanted to cancel, Amazon “knowingly complicated” the process with complex procedures.
According to a statement from the ultra-liberal, anti-big business chair, “Amazon tricked and trapped people into recurring subscriptions without their consent, not only frustrating users but also costing them significant money.”
Amazon responded by stating that FTC’s claims are “false on the facts and the law” and that “by design we make it clear and simple for customers to both sign up for or cancel their Prime membership.” Amazon also said the federal agency filed its suit without advance notice, while the two sides were still discussing the case.
Currently, there are more than 200 million “Prime” members who pay $139 a year to get free and faster shipping of products and discounts on other offerings including streaming movies and groceries at corporately-owned Whole Foods. Amazon last year grossed more than $35 billion just from the revenue generated by its “Prime” subscriptions.
The lawsuit also stated that Amazon “substantially revamped its Prime cancellation process for at least some subscribers” shortly before the legal action was filed. However, “prior to that time, the primary purpose of the Prime cancellation process was not to enable subscribers to cancel, but rather to thwart them.”
The FTC is asking the court to court to stop Amazon from engaging in those practices and to force the company to pay an unspecified financial penalty.
Before and during Khan’s two-year tenure as head of the FTC, Amazon agreed to settle other legal issues including a $25 million payment concerning its Alexa home assistant device which the agency said had illegally collected children’s data and another case regarding its Ring home security unit. More recently, the FTC said it would not block Amazon’s $3.49 billion acquisition of 1LifeHealthcare but said it would continue to scrutinize the deal even after the statutory deadline for antitrust review had expired. “The FTC’s investigation of Amazon’s acquisition of One Medical continues. The commission will continue to look at possible harms to competition created by this merger as well as possible harms to consumers that may result from Amazon’s control and use of sensitive consumer health information held by One Medical,” said FTC spokesman Douglas Farrar.
Since she was appointed as FTC chair in June 2021, Khan has sued to block 10 deals all involving large corporate firms seeking to gain greater share of market through acquisition. She has been particularly active in seeking to block deals initiated by tech companies including Google and Microsoft. Upcoming on her docket early next year will be the proposed Kroger-Albertsons merger which fits directly in the wheelhouse of deals she doesn’t like. In 2017, while a law student at Yale, she co-wrote a paper called “Market Power and Inequality: The Antitrust Counterrevolution and Its Discontents,” in which she cited the 2015 Albertsons acquisition of Safeway as ineffective.
Clearly, Khan’s been “big game hunting” for Amazon since at least 2017 after she published another paper in The Yale Law Journal titled, “Amazon’s Antitrust Paradox,” which took the position that interpretations of antitrust law should be broadened to address tech companies like Amazon, effectively upending decades of established antitrust doctrine. “As Amazon continues both to deepen its existing control over key infrastructure and to reach into new lines of business, its dominance demands the same scrutiny,” she stated.
I don’t think either side will be settling this huge issue.
Round The Trade
Amazon news never seems to stop and as I write this, Amazon Prime Days are just ahead. The indulgefest will begin on July 11 and end a day later. After a challenging year for “Godzilla,” Amazon is hoping its Prime members can lift sales to levels above last year’s records when it sold more than 300 million items and amassed estimated revenue of $11.9 billion. According to research analytics firm Numerator, Prime member households spent an average of $197.92 during the 48-hour event…BJ’s Wholesale Club has added Steven Ortega and C. Marie Robinson to its board. Ortega is chairman of the board of Leslie’s, Inc., a publicly-traded pool and spa care company, and Robinson currently serves as executive VP and chief supply chain officer for foodservice distributor Sysco. She previously worked for retailers Walmart, Smart & Final and A&P (we won’t hold that against her) …a tip of the hat to John Persons, who last month was promoted to COO of Northeast Grocery Inc. (NGI), the parent company of Tops Friendly Markets and Price Chopper. John was most recently president of Tops (where he began his career in 1984). NGI has named 34-year Tops veteran Ron Ferri to take his place. In his new role, Persons will oversee both regional chains as well as Northeast Shared Services (the subsidiary which provides administrative services to both retailers). He will report to someone he’s very familiar with – Frank Curci, CEO of NGI. John Persons – talented merchant, good guy.
Local Notes
Plum Market, the Farmington Hills, MI-based natural and organics retailer, will open its sixth store later this year on 48th Street NW in Washington, DC. The site was most recently a Fresh
& Green (remember that Robin Michel disaster) and originally opened as an A&P store in 1964 before becoming a Super Fresh unit in the 1980s. Demographically, the site is excellent, but being the “new kid in town” won’t be easy for Matthew and Marc Jonna, the two brothers who founded Plum Market in 2006. The DC market has been a hot bed of new store activity during the past month with the openings of Whole Food and Lidl units. The new 47,000 WFM debuted at the historic Walter Reed development (7150 12th Street NW), marking the eighth District location for the unit of Amazon. Lidl opened its second of three planned DC stores in Columbia Heights (3100 14th Street NW). The 27,000 square foot discount store follows the opening of the German chain’s Skyland Town Center store in Anacostia last fall. Another Lidl unit is expected to open next year on Upton Place in the tony Cathedral Heights area. The new Lidl and WFM units opened on June 28. While still in the District, a tip of the hat to the folks at Giant Food, who once again sponsored the annual National Barbecue Battle held on June 24-25. The weather was great, the crowds were large and thanks to hundreds of Giant associates who volunteered their services, the event was a big winner. It was especially heartwarming to see 90-year-old Virginia Ali, co-founder of Washington institution Ben’s Chili Bowl, be part of the festivities. Giant Food and Ben’s Chili Bowl just announced an exclusive distribution deal. Virginia and her late husband, Ben, founded the chili and hot dog joint located at 1213 U Street NW, in 1958…Sprouts Farmers Market is scheduled to open its Burtonsville, MD unit on November 10, a few months after it debuts another Mid-Atlantic store in Haddon Township, NJ in September. Another Sprouts unit will open next year in Westminster, MD…Eddie’s Supermarkets, which in the 1970s had 26 independently owned locations in the Baltimore area, is down to two stores after owner Dennis Zorn, closed his supermarket on Eager Street (Mount Vernon) last month. That leaves only Nancy Cohen’s two upscale units (Roland Avenue and Charles Street) as the remaining entities of what once was a thriving franchise… from the obituary desk this month we have a couple of deaths to report, including Pete Mancini, 85, former Richmond-area food broker (J.P. Mancini) who I remember as one of our earlier supporters after we acquired Food World in 1978. The Richmond market was a new territory for Dick Bestany and me, and for the first few years we struggled to attract business. Pete not only gave us encouragement to continue with our style of journalism he also bought advertising in those lean, early years. Pete leaves behind his wife June and five children. He was pre-deceased by another son, Michael Shawn Mancini. An excellent salesman with street smart skills, Pete Mancini will be missed…another death this month comes from the acting world. Alan Arkin, 89, was truly one of my favorite actors. While many know him for his dry, sarcastic wit (“Argo,” “Little Miss Sunshine,” “The Kominsky Method”), I’ll best remember Arkin for two dramatic roles early in his career. In 1967’s “Wait Until Dark,” Arkin’s role as a psycho killer, Roat, who terrifies blind Audrey Hepburn was truly chilling. Two years later as deaf-mute Singer in “The Heart Is A Lonely Hunter,” Arkin’s screen presence is both mesmerizing and disturbing – a tribute to his skills as an actor. With 111 film and TV credits in a career that spanned seven decades, Alan Arkin was one of the best.
