Public information shows that the U.S. Federal Trade Commission (FTC) has charged three Amazon (AMZN.US) executives for participating in a scheme to make it difficult for customers to cancel subscriptions to the company's Prime membership service.The FTC filed a lawsuit against Amazon in June, naming senior vice presidents Neil Lindsay and Russell Grandinetti and vice president Jamil Ghani as defendants on Wednesday.

The watchdog said they helped orchestrate the scheme and ignored requests from employees to stop using techniques that "misled or deceived users" into "signing them up for recurring bills".

Documents show that Lindsay is responsible for the membership program, Grandinetti is responsible for the international consumer business, and Gani is responsible for Prime’s subscription program.The FTC cited an internal Amazon memo from 2017 discussing concerns that registrations cannot be easily canceled by customers.

“An unknown $12.99 charge could mean groceries for a family, gas money for a car, or just the last bit of money to pay rent,” an Amazon employee, whose name is blacked out in public documents, wrote to Ghani in 2020. "Do we think that when they find out about this unknown charge [from Prime], they should also call customer service and ask for a refund?"

In a lawsuit filed in June this year,The FTC accused Amazon of deceiving consumers into signing up for Prime membership and intentionally making it difficult to cancel.

Lindsay, Grandinetti and Ghani declined to comment, but an Amazon spokesman said there was no basis for adding them to the lawsuit.

"These leaders have worked tirelessly to make Prime an exceptional program that customers love, and we fully support them," said Amazon spokesman Tim Doyle. "Claims that their efforts were not motivated by the best of intentions are unfounded and completely contrary to the FTC's own standards for such claims. We have always made it clear and simple for customers to sign up and cancel Prime, and we hope to prove the FTC's claims to the contrary wrong."

Prime membership has been a key differentiator for Amazon, helping it convert occasional customers into loyal customers who make Amazon their default choice when shopping online. Amazon's biggest rival, Walmart (WMT), launched a $98-a-year Walmart+ subscription in 2020 that offers many of the same benefits. Amazon Prime membership costs $139 annually and $15 monthly.

Confusion and difficulty over how to cancel a Prime membership were the subject of multiple internal memos approved by Lindsay, according to the FTC, including one that expressed concern that suddenly simplifying the cancellation process would hurt Amazon's business.

business impact

An internal memo approved by Lindsay and included in the lawsuit reads, "Based on the results of our experiment, we believe that increasing transparency on individual transactions at sign-up is not the right approach and that changes that have such a dramatic impact on (customer experience) should not be rolled out suddenly given the impact on business performance."

Lindsay also said he didn't mind design flaws in the Prime subscription process because once customers discover the value of Prime, they won't want to cancel, according to the FTC.

The lawsuit said Amazon made some changes in 2021 in response to regulatory pressure from the U.S. Federal Trade Commission and the European Union, but executives tried to minimize the impact on the business.

"Given how hot this topic has been in the media recently and the risk of regulatory action by some states, I'm wondering how you would thread the needle," the complaint said.'Between convenience to join, convenience to join without mistake and convenience to unsubscribe’”.

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