Arizona Sues Amazon, Alleging Unfair and Deceptive Practices

The logo of online store Amazon is displayed on a tablet in Lille, France, on Aug. 28, 2019. (Denis Charlet/AFP via Getty Images)

Arizona Attorney General Kris Mayes has filed two lawsuits against Amazon, accusing the online giant of unfair and deceptive business practices under the Arizona Consumer Fraud Act and the Arizona Uniform State Antitrust Act.

“Amazon’s anti-competitive and monopolistic practices have artificially inflated prices for Arizona consumers and harmed smaller third-party retailers that rely on its platform,” said Ms. Mayes in a press release last week. “Amazon must be held accountable for these violations of our state laws. No matter how big and powerful, all businesses must play by the same rules and follow the same laws as everyone else.”

The first lawsuit takes aim at Amazon Prime’s cancellation process, which it alleges is designed to be “intentionally confusing and misleading,” according to the May 15 press release.

Users are forced to navigate an elaborate and manipulative interface with “skewed wording, confusing choices, and repeated nudging,” the lawsuit claims.

The cancellation process employs methods known as “dark patterns,” the lawsuit alleges, which “exploit cognitive biases to influence and manipulate consumer choices.”

The Federal Trade Commission released a report in September 2022 confirming the rise in the use of “dark patterns” by companies to “trick or manipulate” consumers into purchasing products or services or into sharing their data. Dark patterns also make it difficult for consumers to cancel subscriptions.

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The lawsuit cites a 2022 article by Business Insider (updated in June 2023) in which internal documents exposed Amazon’s admission that it had intentionally used these deceptive practices for several years to lock its Prime members into the memberships. Those documents referred to the classified project as “Project Iliad,” the lawsuit said, evoking “the long, arduous Trojan War, which Amazon implemented to thwart Prime membership cancellations by adding multiple layers of questions and new offers before a Prime member could cancel their subscription.”

Internal documents also allegedly showed that Project Iliad succeeded in reducing Prime cancellations by 14 percent.

The second lawsuit targets Amazon’s “Buy Box” algorithm, which determines which offer for a given product is made available to the consumer via the “Buy Now” or “Add to Cart” buttons.

“Amazon designs its product pages to obscure the fact that other offers for the same item are available on Amazon,” the lawsuit charges, noting that almost 98 percent of purchases on Amazon “are made via the Buy Box.”

While consumers are under the reasonable assumption that the “Buy Box” price is the best price available, the Buy Box algorithm is allegedly “biased in favor of Amazon first-party retail offers or offers from third-party sellers who participate in Fulfillment By Amazon.”

Amazon charges third-party sellers “hefty fees to store their inventory, pack their products, ship orders, handle returns, and communicate with customers” as part of Fulfillment by Amazon (FBA), the lawsuit says.

The lawsuit also accuses Amazon of unfairly maintaining its monopoly in the online retail market by “enforcing unlawful price parity agreements through its Business Services Agreement,” according to the press release.

These agreements are alleged to preclude third-party sellers from offering lower prices outside of Amazon, inhibiting competition against Amazon and ultimately inflating prices for its own consumers.

Mr. Mayes demands a jury trial in both lawsuits.

Not the First Time

The Arizona lawsuits are hardly the first time Amazon has found itself in court over its business practices.

The FTC and a coalition of 17 states sued Amazon in 2023, alleging that the online retail and technology giant is a cyber monopolist that uses unfair anti-competitive strategies to illegally maintain dominance in the online retail market.

One practice was allegedly hiking the fees it charges to sellers so steeply that they took nearly half of every dollar a seller made using Amazon’s fulfillment service. The lawsuit also accused Amazon of “quietly and deliberately” raising prices through “a covert operation called ‘Project Nessie,” which, it alleged, intentionally inflated the prices Amazon shoppers paid.

In 2022, Washington State Attorney General Bob Ferguson announced that—through the results of a price-fixing investigation conducted by his office—Amazon would be shutting down its “Sold by Amazon” program nationwide.

Mr. Ferguson’s office simultaneously filed the lawsuit—seeking civil and injunctive compensation for each violation of RCW 19.86, the Unfair Business Practices-Consumer Protection Act—and a legally binding Consent Decree, in which Amazon agreed to shut down its “Sold by Amazon” program nationwide and pay $2.25 million to the Attorney General’s Office.

Also in 2022, California Attorney General Rob Bonta filed a lawsuit against Amazon, accusing the company of suppressing competition and causing price increases across the state due to its anticompetitive contracting practices in violation of California’s Unfair Competition Law and Cartwright Act.

Mr. Bonta alleged that to avoid pricing competition with other online e-commerce websites, Amazon requires merchants to enter into agreements that penalize them severely if their products are offered for a lower price on websites other than Amazon.

“We won’t allow Amazon to bend the market to its will at the expense of California consumers, small business owners, and a fair and competitive economy,” Mr. Bonta said in a press release announcing his state’s lawsuit.

Attorney General Mayes feels the same way in Arizona.

“Arizona consumers deserve to be treated fairly and without deception by big corporations like Amazon, and small businesses deserve a level playing field,” she said. “Amazon should change its business practices to comply with Arizona law.”