Amazon Investor Sues For Records, Alleging Prime Membership Dark Patterns Breach Fiduciary Duty
DM Cohen Inc. is suing Amazon over claims the company uses “dark patterns” to dupe consumers into unknowingly enrolling in Amazon Prime, with automatically-renewing subscriptions and a labyrinthine cancellation process for subscribers who want to end their memberships.
The lawsuit seeks internal files from Amazon under a law giving shareholders broad access to corporate records if they credibly suspect wrongdoing and may be attempt to find evidence that could be used for fiduciary breach claims in potential future litigation.
DM Cohen's concerns are spurred on by FTC allegations that Amazon pushed to retain a Prime enrollment process that they knew misled consumers, including a purposefully complicated cancellation system internally code-named “Iliad”, after Homer's notoriously arduous to read epic ancient Greek poem.
Liz Morton
In that case, the FTC has taken the rare step of naming specific executives who they say were aware of the company’s misconduct and chose not to act - Neil Lindsay, senior vice president overseeing Prime during the period; Russell Grandinetti, the company’s senior vice president of international consumer; and Jamil Ghani, a vice president who oversees the Prime subscription program.
In a meeting with Amazon designers, Defendant Lindsay was asked about Amazon’s use of dark patterns during the Prime enrollment process. Lindsay explained that once consumers become Prime members—even unknowingly—they will see what a great program it is and remain members, so Amazon is “okay” with the situation.
Accordingly, Amazon declined to remove problematic design elements from its checkout enrollment flow.
Amazon has known since at least 2016 that its Prime checkout enrollment flow contains design elements that trick people into signing up. In particular, designers within the Prime Organization and researchers within a separate Shopping Design Organization (responsible for studying consumer complaints) knew these design elements caused Nonconsensual Enrollment and urged Amazon leadership to change them.
For example, in late 2020, designers and researchers prepared a draft memorandum explaining, in detail, Amazon’s use of design techniques “designed to mislead or trick users to make them do something they don’t want to do, like signing up for a recurring bill, favoring shareholder value over user value.”...
...Defendant Lindsay even suggested something he called “scary”—that Amazon should consider making it as easy to decline Prime as to enroll.
The meeting participants also discussed specific associated changes, such as changing the decline link to a button to make consumers less likely to overlook it.
Eventually, Defendant Grandinetti vetoed any changes that would reduce enrollment. He directed the Prime Organization to improve the checkout enrollment flow as much as it could—but only “while not hurting signups.”
Consequently, Amazon continued to use the designs that caused Nonconsensual Enrollment.
According to Cohen's lawsuit, Prime membership dark patterns alleged to be used by Amazon include:
- Forced Action - “Forced Action” is a design element that requires users to perform a certain action to complete a process or to access certain functionality.
- Interface Interference - “Interface Interference” is a design element that manipulates the user interface in ways that privilege certain specific information relative to other information.
- Obstruction (“Roach Motel”) - “Obstruction,” also known as the “roach motel” technique, is a design element that involves intentionally complicating a process through unnecessary steps to dissuade consumers from an action.
- Misdirection - “Misdirection” is a design element that focuses a consumer’s attention on one thing to distract from another.
- Sneaking - “Sneaking” is a design element that consists of hiding or disguising relevant information, or delaying its disclosure. Amazon uses Sneaking by failing to clearly and conspicuously disclose Prime’s terms and conditions during its enrollment checkout flow, including its price and auto-renew attribute. Amazon also employs Sneaking by failing to show Prime’s price or its auto-renewal feature in the consumer’s cart.
- Confirmshaming - “Confirmshaming” is a design element that uses emotive wording around the disfavored option to guilt users into selecting the favored option. Until at least 2020, the Prime checkout enrollment flow used confirmshaming by requiring consumers who sought to decline Prime to click a link stating “No thanks, I do not want fast, free delivery.”
DM Cohen says Amazon leadership has a documented history of involvement in the Prime scheme, naming Lindsay, Grandinetti, and Ghani specifically, and citing "significant corporate trauma" that Amazon has suffered as a result of the wrongful conduct of these and other unnamed executives.
As a result of the wrongful conduct described above, Amazon has suffered and is suffering significant corporate trauma, including defending itself in an ongoing FTC Action in the Western District of Washington...
...Amazon and the Fiduciaries have made concerted efforts to thwart and delay the FTC’s investigation. Specifically,the FTC identifies the Fiduciaries and other unnamed executives as having misused “privileged” designations on documents addressing issues related to Nonconsensual Enrollment and the Iliad Flow, and by doing so —when such documents were not in fact privileged—obstructed the FTC’s investigation and delayed the FTC’s ability to access the falsely withheld material.
Moreover, in response to various Civil Investigative Demands issued by the FTC...Amazon did not cooperate by proposing search terms and custodians that led the FTC away from key documents, delaying document productions and not timely producing documents, failing to identify key custodians, and petitioning to quash certain of the FTC’s demands — all of which the FTC categorized as “intentional misconduct meant to delay the Commission’s investigation.”
The lawsuit argues that history provides a credible basis for DM Cohen to request access to records which may help them investigate "possible breaches of fiduciary duty, mismanagement, corporate waste, and other violations of law by members of the Company’s Board of Directors and management, including the Company’s senior officers."
DM Cohen Inc., is represented by Cooch & Taylor PA and Johnson Fistel LLP. Amazon has not responded to requests for comment and has not yet made an appearance in this case - which is DM Cohen Inc. v. Amazon.com Inc., Del. Ch., No. 2024-0192, complaint filed 2/29/24.
