Amazon faces a lawsuit alleging it misled Prime subscribers by charging an extra fee for ad-free streaming of movies and TV shows.
A lawsuit filed in California federal court on Friday alleges breach of contract and violations of state consumer protection laws for users whose Amazon subscription terms changed when the company made its ad tier the default option for its over 100 million subscribers.
Amazon's Ad-Supported Subscription
In 2023, Amazon, without providing comment, revealed its intention to enable ads for all Prime Video viewers. The platform transformed the service into a major player in streaming ads and the biggest ad-supported subscription platform last month, where users need to pay an extra $2.99 monthly to enjoy ad-free viewing.
The lawsuit claims that besides being "unfair," Amazon unlawfully gained from promoting Prime Video as "commercial-free" for years before introducing its ad-supported tier, which damages both consumers and fair competition, as stated in the complaint.
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Amazon's Misleading Tactics
Amazon's marketing misled and harmed annual subscribers by not meeting their reasonable expectations after automatic ads started appearing, alleging that Amazon breached contracts with plaintiffs and class members by not delivering ad-free streaming of TV shows and movies as promised with annual memberships.
When Amazon announced that it would introduce limited ads to Prime Video content in late September, the company attributed investing in engaging content to the change. Amazon has also released shows such as "The Boys," "Reacher," "The Summer I Turned Pretty," and "The Marvelous Mrs. Maisel."
The company also mentioned that it would email Prime members several weeks before introducing ads into Prime Video, providing information on how to sign up for the ad-free option if desired. The cost of Prime remained the same for the option with ads.
The Class-Action Lawsuit
The proposed class-action lawsuit seeks at least $5 million in damages. It requests a court order to prevent Amazon from further deceptive practices on behalf of users who subscribed to Prime before December 28, 2023, alleging breach of contract, false advertising, unfair competition, and other violations of consumer protection laws in California and Washington.
Last year, the Federal Trade Commission sued Amazon for allegedly tricking consumers into signing up for Prime and making it difficult for them to cancel their subscriptions. The suit claimed that Amazon uses a manipulative and deceptive interface to enroll users in automatic renewals when many subscribers only wanted Prime Video, a cheaper option.
The FTC says Prime is crucial for Amazon's retail dominance because it keeps users tied to the company's marketplace by providing perks like access to Prime Video.
Amazon also faced a lawsuit in 2020 for unfair competition and false advertising regarding its policy of potentially ending consumers' access to content bought through Prime Video. However, a federal judge in 2022 dismissed the proposed class action, supporting Amazon's argument that its terms of use inform users that purchased movies and TV shows might become unavailable due to licensing restrictions from providers.
