Are the Latest FTC Cases against Tech Good for Consumers?

Jennifer Huddleston

In June, the Federal Trade Commission has taken a number of actions against America’s leading tech companies. The agency is tasked with protecting consumers from actions that might manipulate the benefits of a free market, such as fraud or illegal monopolization behavior. But these latest actions appear to focus on something other than consumers.

FTC v. Amazon Prime

The FTC recently filed a case against Amazon, claiming it was using manipulative practices, or “dark patterns,” to mislead consumers into joining its Prime service. Amazon then made it more difficult to unsubscribe. The company’s Prime service has over 200 million subscribers worldwide (including over 160 million in the US) and retains high levels of consumer satisfaction.

Earlier this year, when the FTC announced a new rule targeting services that lock consumers in their subscriptions by making it easy to sign up and more difficult to cancel, it initially seemed like a return to a consumer‐​focused priority for the agency. Many consumers probably welcomed such an announcement, having been annoyed by fitness programs or newspapers that provide easy ways to sign up for a subscription online, only to find that they require in‐​person visits or calls to cancel.

Regardless of whether consumers feel this behavior amounts to personal manipulation and therefore in need of free market regulation, or if they feel it to be merely a disliked practice that may turn out bad for business in the future, Amazon’s Prime service does not fit this model. Amazon goes above and beyond in the ease it provides customers if they decide to stop their Prime service: the ability to unsubscribe only takes a few clicks, and the company will even provide a refund if the user didn’t utilize the service since their last membership charge.

Beyond the alleged “difficulty” in unsubscribing, the FTC also alleges Amazon uses “dark patterns” to keep consumers from unsubscribing to Prime. Originally, the term “dark patterns” was meant to apply to deliberately deceptive practices designed to trick consumers. Now, it is misapplied to either any practice that might attempt to persuade consumers or the results of a choice to end a subscription or opt out of a feature may have. This is why the term has been used as a critique of Prime’s unsubscribe process.

Any business would want to make sure consumers are aware of the services they are losing or could gain access to via the product they are canceling in order to allow them to make an informed decision. Calling this a “dark pattern” is yet another attempt by the FTC to vilify standard business practices. Demonizing such information could result in less information for consumers to make thoughtful choices.

FTC Challenges Microsoft‐​Activision

The FTC has continued to challenge several mergers and acquisitions and seems to apply particular scrutiny to those within the technology industry. The latest example of this is the FTC’s request for a preliminary injunction to prevent Microsoft’s acquisition of video game company Activision. As with some of its previous challenges, this action focuses on a market that does not accurately reflect the consumer experience so the FTC can make a case that there is anti‐​competitive behavior.

The Microsoft‐​Activision deal has already been approved by European competition authorities. The gaming market is incredibly competitive and evolving, with options for traditional consoles, PCs, mobile, and even virtual reality gaming. But the FTC, as well as the United Kingdom’s competition authority, have chosen to focus their case on “cloud gaming,” a new form of gaming that relies on remote services to stream games over the internet.

The problem with this approach is that cloud gaming has struggled to gain traction with both consumers and game developers. Microsoft is an early actor in this space, but cloud gaming itself has not emerged as a unique marketplace. Notably, however, in highly popular fields like mobile gaming, Microsoft is far from the largest player. In fact, their acquisition of Activision may lead to more sizable competition with rival Sony.

FTC and Meta

Finally, two concerning revelations about the FTC’s actions towards Meta have emerged. These actions should give pause around the agency and administrative state at large to abuse its power.

In May, the FTC announced that it was modifying its 2020 settlement with Meta to include new requirements and restrictions that would blanket ban the use of data on users under the age of 18. This stems from concerns related to a flaw in the Messenger Kids app that predated the original agreement and was identified in an independent assessment. While all three commissioners voted to support the proposal, Commissioner Alvaro Bedoya expressed concerns about whether the agency had the legal authority to impose such limits on data use based on the evidence. Commissioner Bedoya’s concerns are legitimate, and Meta has challenged the action in court.

Not long after this action, it was made public that FTC Chair Lina Khan had refused to follow internal ethics recommendations to recuse herself from the Meta‐​Within case, a recent FTC action to block a merger that the agency lost in court. In the memo addressed to then Commissioner Christine Wilson, the agency’s ethics official expressed concerns about how Chair Khan’s prior statements on Meta acquisitions might raise questions about the Chair’s ability to be impartial in this matter.

Khan’s refusal to follow this advice did not amount to an ethics violation but highlights concerns that these actions are not based on a sound policy belief, but rather on personal politics against certain companies. It should certainly be concerning to those beyond tech companies that recommendations are not being followed. Such a trend could impact the perceived legitimacy of future FTC action even well beyond Khan’s tenure as chair.

Conclusion

The FTC’s increased scrutiny of America’s leading tech companies shows no sign of slowing down, but these latest cases only further highlight the concerns that such actions are not focused on the consumer. An FTC run amuck without an objective focus on consumer welfare, and unchecked by courts or Congress, risks harming rather than protecting its customers.