What’s Going On Between the FTC and Amazon?

Prior to her ascension to chair the Federal Trade Commission, Lina Khan gained popularity in progressive legal circles for her criticism of the popular American retailer Amazon. Her 2017 article in the Yale Law Review, “Amazon’s Antitrust Paradox” not only focused on the titular retailer but also sought to counter the longstanding pro-consumer approach to enforcement writ large. Chair Khan has a long professional history focused on scrutinizing Amazon. For that reason, it is troubling that the agency she oversees, the Federal Trade Commission (FTC), appears to be disregarding traditional due process norms when engaging with the company.  

On June 21^st, the FTC announced a lawsuit against Amazon for what the agency calls “non-consensual subscriptions and cancellation trickery.” The lawsuit raises questions about whether the agency is demanding a “perfect” signup and cancellation process, substituting the agency’s own judgment about how Amazon should manage its interactions with its customers. Amazon will now have to defend its actions and a court will decide whether the evidence is sufficient to find a law violation.  

For its part, Amazon’s Prime service has proven widely popular among consumers, so it is far from clear that there exists a deep persistent pattern of consumer harm emanating from the company. What is interesting about this case is how we got here. Amazon’s public statement in response to the FTC filing its complaint, in part, stated: 

Several things jumped out from this statement. Why did the FTC spring the lawsuit on Amazon as a surprise? Moves to litigate by surprise are the kind of tactic used by the FTC in severe situations, often fraud cases where the agency is concerned that prior notice will result in asset dissipation and document destruction. It is wholly unnecessary in routine cases where the defendant is working in good faith to resolve the issue at hand. Further, without any forewarning of the lawsuit, Amazon was prevented from fully being able to explain itself to the Commissioners, a fundamental due process right that is routinely afforded even to those who are being accused of engaging in hard core fraud.   

Further issues emerge from a reading of the complaint itself. First, the Department of Justice (DOJ) is absent from the complaint. When the FTC seeks civil penalties, the FTC Act requires the agency to turn to the DOJ. The DOJ then decides whether to prosecute the case on behalf of the FTC or send the case back to the Commission. Here, the DOJ is absent. Given the FTC’s rush to litigate and avoid allowing Amazon to meet with the Commissioners, one would think the harm Amazon was purportedly causing to consumers in the market would be of serious interest to the DOJ. Yet, the DOJ for some reason appears to have taken a pass.    

The FTC’s tactics seem to have been over the top. During the investigation the FTC served a civil investigation demand notice to Amazon executives over the Fourth of July holiday weekend last year at their personal residences. These executives work for one of the largest companies in the world, normally such individual notices are sent to them at the company. And Amazon filed a motion to quash when the FTC tried to interfere with the executives’ choice of lawyers. These aggressive actions are not proportional to the agency’s purported concern that some customers may have labored too long to cancel a popular subscription service.  

The lawsuit suggests Amazon’s motion to quash, as well as other efforts by the company to defend itself during the course of the FTC investigation, were somehow out of line.  Why did the FTC complain to the court that the company attempted to defend itself by asserting its basic legal rights?   

The case brought against Amazon is only the most-recent example of the FTC’s unorthodox operations under Chair Khan. Last month, her refusal to accept the advice of the agency’s ethics officials came to light sparking questions of whether or not she is leading the agency impartially and without bias. Due process and procedural fairness norms are not negotiable and must be afforded to all companies    

With more than two years of questionable actions under Chair Khan, the FTC now finds itself under the microscope of multiple congressional investigations into its operations. As these investigations proceed, hopefully, Congress can hold the agency accountable. 

About the authors

Sean Heather

Sean Heather is Senior Vice President for International Regulatory Affairs and Antitrust.

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