The Iliad Flows: Federal Judge Allows FTC “Dark Patterns” Suit Against Amazon to Proceed

In a decision containing significant implications for online sellers, a federal judge in Washington State on May 28th allowed the Federal Trade Commission’s (FTC) civil lawsuit against Amazon and three of its senior executives in connection with its Prime subscription program to proceed. Judge John Chun denied Amazon’s motion to dismiss, holding that Amazon’s disclosures and its cancellation process for Prime could be misinterpreted by a reasonable consumer. Judge Chun recognized the legal sufficiency of the FTC’s claim that Amazon engaged in so-called “dark patterns,” a term used to describe manipulative, coercive, or deceptive online marketing techniques that trick consumers into purchasing services that do not reflect their true intent, choices, or consent. The FTC brought the case under Section 5(a) of the Federal Trade Commission Act (FTC Act), which broadly prohibits deceptive consumer practices, and Section 4 of the Restore Online Shoppers’ Confidence Act (ROSCA), which focuses more narrowly on e-commerce disclosures.

The FTC’s allegations fit into three broad categories:

• Amazon’s disclosures were insufficiently “clear and conspicuous.”
• Amazon had not established “express informed consent” to purchases of Prime.
• Amazon’s cancellation procedure, referred to by the FTC and the court as the “Iliad Flow,” was far more cumbersome than the enrollment process.

Judge Chun focused on the appearance and context of the disclosures, along with the relationship between the disclosures and other items on the screen. For example, Amazon used a “prominent” button to enroll in Prime, as contrasted to a “comparatively inconspicuous” link to decline enrollment. In terms of timing, Amazon “interrupted” the online shopping transaction by redirecting the consumer to a page regarding Prime before displaying the page the consumer sought to access to make a purchase. Amazon also listed the price of a Prime subscription after the free trial and the auto-renewal terms in small print at the bottom of the screen. Judge Chun found that the FTC adequately alleged that Amazon did not clearly and conspicuously disclose the terms because a reasonable consumer seeking to complete a purchase on Amazon’s marketplace could miss the small print disclosures and mistakenly believe that clicking the orange button was the only way to check out, and/or mistakenly believe the button related only to shipping speed for the purchase at issue. Finally, Judge Chun ruled that the FTC had pleaded a legally sufficient claim that Amazon’s collection of billing information prior to disclosure of the terms violated ROSCA.

Judge Chun also highlighted the FTC’s allegations that Amazon failed to obtain express informed consent to enroll in Prime. Judge Chun held that the FTC plausibly alleged that a reasonable consumer clicking the orange “Get FREE Two-Day Delivery” button might not know they are consenting to automatically renewing a Prime subscription, and might believe, based on the visual discrepancy between the yes and no buttons, that clicking the yes button is the only way to complete the checkout.

Judge Chun expressed concern that Amazon made it much harder to cancel a Prime subscription than to enroll in Prime. Enrollment entailed only a single click, yet cancellation required consumers to “click six times and go through four screens.” Amazon enticed customers not to cancel by offering alternatives during the elongated cancellation process. On the final page of the cancellation journey, the consumer “needed to scroll down past various other options before they could see the ‘End Now’ button that would allow them to complete cancellation.” Judge Chun accepted as true the FTC’s allegations that these features complicated the cancellation process.

Judge Chun concluded Amazon could potentially be subject to civil penalties under the FTC Act because the facts alleged by the FTC, deemed true at the motion to dismiss stage, could establish that Amazon had “actual or constructive knowledge that its Prime sign-up and cancellation flows were misleading consumers.” Judge Chun also held personal liability could potentially be imposed on the individual defendants based on their alleged supervisory control over and participation in decisions regarding Prime, including vetoing changes to the disclosures that would have increased transparency.

Judge Chun’s ruling has several potentially significant implications for web-based marketing practices of other consumer-facing businesses. At the broadest level, it demonstrates that the legality of consumer disclosures is likely to turn on specific facts such as size, appearance, and location, making it difficult for a defendant to escape liability at the outset of the case through a motion to dismiss. This approach, if adopted by other courts, is likely to increase the cost, risk and burden of a lawsuit. The ruling teaches that the statutory terms “clear and conspicuous” are context-driven as opposed to self-applying and that the requirement of “express informed consent” imposes a relatively high bar. Furthermore, the legality of a cancellation process can be judged by comparing it to the enrollment process. Finally, the specter of personal liability for executives in these “dark patterns” cases should be front of mind for in-house counsel as they navigate necessary changes to their app and online experiences.

Given the FTC’s increased interest in policing “dark patterns” and the potential cost and exposure of these lawsuits, businesses engaged in online marketing and sales should pay close attention to their disclosures and user interfaces, and should consult experienced counsel as a means to minimize the risk of liability and its attendant financial penalties and expense.

Attorneys in the top-ranking Ballard Spahr Antitrust and Competition Group are on hand to monitor and advise on this development.

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