A consumer advocacy group has accused Starbucks of profiting from an unfair app-based payment system, saying it made a staggering $900 million in profits over five years. If Washington state rules in favor of the complainants, Starbucks could be in trouble.
The Washington State Consumer Protection League has asked the state attorney general to investigate Starbucks' gift card and app payment systems that lead customers to pay more than they actually need. The group also talked about how customers can't spend the full amount they top up on their prepaid accounts, raising some concerns about how the practice will be handled.
Chris Carter, the group's campaign manager, spoke of how Starbucks manipulated its payment system to prevent consumers from spending all their money. Carter added: "A few bucks on a payments platform may not sound like much, but it adds up. Over the past five years, Starbucks has claimed nearly $900 million in unused gift cards and app funds as company revenue, boosting corporate profits and inflating executive bonuses."
Shockingly, the official complaint states: "Last year, customers loaded approximately $15 billion on Starbucks cards, and the company relied on these funds as a source of interest-free working capital. Therefore, the company had a strong incentive to maximize the flow of funds to the payment platform, and in fact, the company attempted to maximize this flow of funds by using some manipulative digital design features on its mobile applications."
Starbucks, in its defense to Fortune, said customers can pay for their order with the remaining balance in the app or on a gift card and pay the remaining balance in-store with cash, bringing the balance down to zero. Company spokesman Sam Jefferies even talked about how the company is working to ensure that the state of Washington is confident that the company is complying with all state laws and regulations.
Abusing and profiting from app payment systems is nothing new, we've seen it happen many times in the tech industry. What we want to know more is the severity and how Starbucks will handle the matter. US$900 million is not a small amount in five years of profits. Let's wait and see what the state decides and whether the coffee chain will successfully defend itself.
Full text of complaint:
https://drive.google.com/file/d/1rO5rJr7N0GEFtcJUMaWiwYnz22fJlmck/view