It’s prime time for congressional oversight of the FTC

Every year in July, the 200 million United States members of Amazon’s Prime service are treated to Prime Day, a bonanza of spectacular discounts. This year, however, as customers nationwide scrolled through hundreds of deals, Federal Trade Commission Chair Lina Khan was bracing for a different kind of event: an oversight hearing before the House Judiciary Committee.

The timing created an opportunity because the FTC had just launched a perplexing offensive against Amazon. The agency accuses Amazon, the second most popular institution in the U.S. after the military, of employing so-called “dark patterns” to exploit consumers. It paints Prime’s 200 million subscribers as victims of a “negative option” business model, such as the old Columbia House CD clubs, which shipped customers CDs and charged for them unless they called to decline the service.

The FTC escalated its offensive against Amazon this week by filing an antitrust lawsuit against the company. Both of these cases are unnecessary harassment of the company and a waste of taxpayer dollars with little likelihood of success in the courts.

The FTC heavily redacted the public version of the Prime “negative option” complaint against Amazon, making it difficult to understand the specific accusations. But the apparent legal strategy is puzzling. Instead of launching a more straightforward deception case, the FTC has opted to allege a violation of the “unfairness” standard. Meeting this tougher standard requires proving that the alleged harm to consumers outweighs the benefits to Amazon’s vast subscriber base.

The complaint’s repeated use of the undefined and undefinable term “dark patterns” doesn’t add clarity. The FTC appears to mean, “This practice isn’t deceptive, but we don’t like it.” The question then arises: Is it a “dark pattern” to offer consumers a discount for maintaining their subscription? The FTC seems to think so.

Other aspects of the complaint are confusing as well. As industry analyst Ben Thompson has pointed out, the agency assumes potential Prime subscribers are too ignorant to understand the straightforward process of signing up for Prime unless Amazon adds heavy disclosures. Yet, it also criticizes Amazon for educating consumers when they try to cancel their subscriptions. This inconsistent approach, where Amazon loses either way, suggests an anti-Amazon or even an anti-business bias.

One thing is clear: if the FTC’s argument stands, it could drastically change online subscriptions as we know them. The FTC appears to be insinuating that all auto-renewing online subscriptions are negative options. This could lead to a future where consumers have to manually renew every subscription every time it expires. Is this additional burden what the FTC, or indeed consumers, want?

Meanwhile, the FTC’s just-filed complaint in the antitrust case reveals a similarly perplexing case. The FTC claims that Amazon is a monopoly (even though it has only about 6% of all retail sales and about 38% of the U.S. e-commerce market). The complaint argues that Amazon is using its alleged monopoly status to abuse third-party sellers on the platform it created by requiring them to give their lowest price to Amazon customers and by requiring that “Prime Eligible” offers use Amazon’s own world-class logistics services to process and deliver orders. It’s not at all obvious how either of these practices harms consumers, and in many ways, these practices likely benefit sellers, too.

Perhaps this focus on Amazon is unsurprising given that Chair Khan built her career on a law student note accusing that company of anticompetitive conduct. More surprising are the scorched earth tactics Khan’s allies use to punish those who even mildly question her approach. For example, when the FTC’s designated agency ethics official (DAEO) recommended Khan recuse herself from a case out of concern about the appearance of bias, she immediately faced a hatchet job from a progressive group accusing her of bias. This claim was so unfounded that the FTC commissioners issued a joint statement supporting the DAEO.

Likewise, commissioner Alvaro Bedoya, for gentle pushback on the scope of proposed remedies in a matter involving Meta, was the target of excoriating criticism by Sen. Elizabeth Warren’s (D-MA) former chief of staff, who lobbied for Khan’s confirmation. Bedoya also faced a pressure campaign from progressive groups.

Congress must exercise its oversight responsibility and ask Chair Khan pointed questions about the FTC’s recent behavior, including:

  • Why is the FTC singling out Amazon for a cancellation process that their own complaint admits takes a mere six mouse clicks on a website and which many people have completed in less than a minute when so many other subscription services require phone calls or in-person visits?
  • Does Chair Khan know who leaked documents and the status of the FTC’s antitrust investigation of Amazon to reporters?
  • Is it appropriate for outside parties to privately pressure commissioners in an effort to influence decisions on active investigations?

The American public loves discounted, custom deals online, but they shouldn’t be satisfied with cut-rate, biased enforcement efforts from the FTC. Consumers deserve better.

CGO scholars and fellows frequently comment on a variety of topics for the popular press. The views expressed therein are those of the authors and do not necessarily reflect the views of the Center for Growth and Opportunity or the views of Utah State University.