Allegations of Deception: Popular Online Service Faces Federal Court
One of the world's biggest companies is going toe-to-toe with the U.S. government in a federal courtroom. The dispute centers around allegations that the company deceived customers into subscribing to a profitable service that was intentionally difficult to cancel.
Jury to Decide on High-Stakes Lawsuit
The lawsuit is a significant one, as it targets a major global company. In a departure from the usual proceedings in complex antitrust cases, a jury will be the one to decide if the company violated any laws. The trial, which is expected to consist of oral arguments, is likely to last for an entire month.
Violation of Consumer Rights: The Core of the Case
The U.S. Federal Trade Commission (FTC) is accusing the company of breaching consumer protection and competition laws. The FTC claims that the company manipulated individuals into subscribing to a service that costs $139 per year or $14.99 per month. Despite the accusations, the company maintains its innocence, staunchly denying any wrongdoing.
Last year, the company revealed that over 200 million people across the globe were subscribed to the service. This was the last time it shared such information with the public.
The current case is just a precursor to another, broader lawsuit by the FTC which accuses the company of operating as a monopoly. The company has contested this claim, asserting that the lawsuit is factually and legally incorrect. This forthcoming trial is expected to take place in 2027, in front of the same judge, John Chun of the U.S. District Court for the Western District of Washington.
Dark Patterns: The FTC's Major Concern
The FTC is alleging that the company used deceptive design elements, known as dark patterns, to trick millions of people into unintentionally signing up for the service. The FTC cites an example where a large button offering free two-day shipping was used to lure users into subscribing without providing detailed information about recurring membership costs. However, a less prominent hyperlink allowed users to avoid subscribing to the service.
According to the FTC, the process to cancel the subscription is overly complicated, involving a four-page, six-click, and fifteen-option journey. The company's internal staff have even referred to this cancellation process as the "Iliad Flow," likening it to the lengthy and grueling Trojan War described in the ancient Greek epic poem.
The FTC claims that the company knowingly allowed millions of customers to unintentionally sign up for the service and refused to rectify this identified issue. The company's staff allegedly even described the situation as an 'unspoken cancer,' fearing that making the subscription process clearer would lead to a decrease in subscribers.
Company's Defense: We're Like Everyone Else
The company asserts that its service's benefits, not deceptive design tactics, attract its members. It argues that its designs and disclosures are on par with, or even clearer than, other subscription services in the industry.
In the company's defense, it states that misunderstandings and frustrations from customers are inevitable, especially for a popular service. Just because a small percentage of customers struggle with enrollment or cancellation does not mean the company has violated the law, the company argues. The company also contests the FTC's application of a broad fraud law to the term "dark patterns," which is not legally defined.
Three of the company's executives, who were named in the FTC's lawsuit, are also defending themselves along with the company as a whole.
Legal Tactics Questioned by the Judge
The company's legal tactics have come under scrutiny by Judge Chun. The FTC alleged that the company concealed damning evidence by unnecessarily marking documents as privileged. After re-evaluating its privilege logs, the company withdrew nearly all its privilege claims and produced almost 70,000 documents on the last day of the discovery period.
Judge Chun described this behavior as akin to bad faith and seemed motivated by the company's desire to gain a tactical advantage. He has sided with the FTC on several procedural rulings and denied the company's attempt to dismiss the lawsuit. The FTC's investigation into the company began during the first Trump administration but the lawsuit wasn't filed until 2023, under the leadership of Lina Khan, a significant appointee during the Biden administration.