One of the reasons Amazon remains the world’s leading online retailer is its Amazon Prime service. Created in 2005, Prime began by offering free two-day shipping. Today, it has approximately 240 million members worldwide—180 million of them in the U.S.—who enjoy free one- or same-day delivery, access to streaming music and video, and exclusive deals like those on Prime Day.
As Market Institute President Charles Sauer writes in RealClearMarkets, Prime should be celebrated “as an example of how successful companies can and must continue to innovate if they wish to remain at the top of the pack.” Instead, both the Biden and Trump Administrations have treated Prime as if it were the bully on the playground.
In 2023, the FTC under then-Chair Lina Khan sued Amazon under the Restore Online Shoppers Confidence Act (ROSCA). The agency claimed Amazon tricked customers into Prime subscriptions using so-called “dark patterns.” But as Sauer points out, “‘dark patterns’ is a spooky sounding name for any practice the FTC decides is ‘manipulative, coercive, or deceptive.’”
Canceling Prime is hardly a mystery. Amazon reports that “96% of Amazon users are able to withdraw from Prime in 90 seconds or less.” Nonetheless, under current FTC Chair Andrew Ferguson, the agency chose to settle the case—forcing Amazon to pay a $1.5 billion fine and another $1.5 billion to 34 million customers. That figure represents just 0.75% of U.S. Prime users.
As Sauer observes:
“This suggests that Amazon was not engaged in an ongoing conspiracy to enroll customers in Prime or prevent them from cancelling their memberships.”
The settlement requires Amazon to make changes to its signup and cancellation buttons, but in the end it mainly served to spare both sides a costly and time-consuming litigation. The real cost, however, is borne by taxpayers and consumers, who fund meritless crusades against companies whose only real crime is serving their customers well.
As Sauer concludes:
“Prime is successful because millions of Amazon users value free shipping and other benefits of Prime membership—not because they were duped by Amazon.”
Hopefully, this case marks the end of the FTC’s obsession with bullying innovators like Amazon. Consumers—not bureaucrats—are the ultimate judge of whether a product or service succeeds.
Read more in RealClearMarkets by clicking here.
