Key Points:

• Attorney General Kris Mayes is suing Amazon for consumer fraud

• Mayes claims Amazon’s Buy Box algorithm is biased towards its own products

• Amazon generates $25 billion annually from Prime subscription fees nationwide

Rebuffed by two different judges, Attorney General Kris Mayes is now making a new effort to get courts to declare Amazon guilty of consumer fraud.

In one case, she is trying to resurrect arguments that consumers buying items on the company’s website are misled into spending more than they should. And, in the other, she said Amazon engaged in a practice of making it easy to sign up for Amazon Prime but difficult to cancel the service, describing it as “a roach motel where it is easy to get in but almost impossible to escape.”

Both, Mayes says, are violations of the Arizona Consumer Fraud Act.

That legislation makes it illegal for any person to misrepresent, conceal, suppress or omit material facts in the sale or advertising of any merchandise that someone might rely on in making a decision. And Mayes said Amazon is a “person” within the meaning of the law.

But both cases were thrown out by judges before Mayes even got to make her arguments. Now, she is back with revised legal theories.

In the first case, the attorney general says Amazon has an algorithm that selects just one seller’s offer to appear in the “Buy Box” on a web page, allowing consumers to add it to their cart with a single click. And the company allegedly designs its product page to obscure the fact that other offers also are available, something Mayes said results in nearly 98% of purchases being made via the Buy Box.

But the problem, she said, is deeper.

“Consumers reasonably believed that the Buy Box displayed the best-priced offers in Amazon’s marketplace for a given item with given delivery time,” the lawsuit states. That, she says, is not true.

“In fact, the Buy Box algorithm is biased,” she said, in favor of products that Amazon itself sells or those offered by third-party sellers who participate in Fulfillment by Amazon,” a program in which the company charges those sellers “hefty fees” to store their inventory, pack their products, ship orders, handle returns and communicate with customers.

And the bottom line, Mayes argues, is that consumers are misled into thinking that Buy Box is the best offer when there may be cheaper alternatives available.

Maricopa County Superior Court Judge Scott McCoy, however, ruled earlier this year there was nothing to show that Amazon did or said anything to make customers believe the Buy Box was the best offer. More to the point, he said that the state’s original 2024 complaint failed to identify instances where the Buy Box offer was more expensive than a competing item offered with the same terms.

In the revised complaint, Mayes is not making the same mistake.

She cites a 2021 instance where Amazon itself was offering the Bob Marley “Legend” record on vinyl for $22.97. That showed up in the Buy Box even though a third-party seller was offering the exact same record for $18.89.

The same thing happened in 2022 when the Buy Box featured a Corsair wireless gaming headset for $107.99, even though a third-party retailer had the same item for $71.

And just last year, a 12-pack of ProsourceFit foam floor tiles, sold by Amazon, was offered in the Buy Box for $48.99; another retailer on Amazon had them for $40.

In each case, Mayes said, each item was stored, handled and shipped by Amazon and each qualified for two-day shipping with Amazon Prime.

“But Amazon’s biased Buy Box algorithm put a thumb on the scale for Amazon Retail, resulting in the more expensive Amazon Retail offers appearing in the Buy Box, and consumers overpaying for items that were available for less from third-party sellers,” the revised lawsuit states.

The other lawsuit surrounds complaints that, until 2023, Amazon used a system where it took at least six separate actions by consumers to cancel their $139-a-year Prime membership online despite multiple claims in advertisements that customers can “cancel anytime.”

And while the company has changed its practices, Mayes wants Maricopa County Superior Court Judge Dewain Fox to order that what Amazon was doing violated the state’s Consumer Fraud Act, mandate the company to surrender any profits it gained from the practice, and be directed not to try something like that again.

Mayes says those subscriptions are valuable to Amazon because, among other reasons, Prime members spend more than double on purchases than non-Prime customers, a figure she said averages to about $1,400 a year. She also said that Amazon collects $25 billion a year in Prime subscription fees, with about three-quarters of that from U.S. subscribers.

What the company launched in 2016, Mayes said, was a process where cancellation required clicking a minimum of six times on Amazon.com:

– Log in to Prime Central;

– click on “manage membership;”

– go to “end membership;”

– click on “continue to cancel;”

– again go to “continue to cancel;”

– go to “end now.”

“The project was a success,” Mayes said, with Amazon managing at one point to reduce cancellations by 14% “as fewer members managed to reach the final cancellation page.”

But none of this process, she said in court filings, was made known to people signing up, only that they were told they could cancel at any time.

Like the Buy Box case, however, she never got to make the arguments.

Fox ruled earlier this year that the state Consumer Fraud Act covers deception or unfair acts or practices “in connection with the sale or advertisement of any merchandise.”

By contrast, the judge said, the state contends that Amazon was engaged in “unfair and deceptive acts and practices in the operation of membership services. And he said that, claims by Mayes notwithstanding, that doesn’t equate to the sale or advertisement of merchandise.

“The court finds that the state did not sufficiently allege a claim under the Arizona Consumer Fraud Act,” Fox wrote.

Mayes, in the revised lawsuit, seeks to remedy that.

“The Prime service for which Amazon charges its subscribers is a ‘service’ and thus constitutes ‘merchandise’ under the Consumer Fraud Act,” the new legal filings say.

And Mayes said Amazon was making statements designed to induce people to buy Prime, statements she said fit the definition of consumer fraud.

“Amazon promised consumers in connection with the sale and advertisement of Prime subscriptions to them that they could cancel Prime subscriptions at any time, while omitting to tell them that it was past and ongoing policy and practice, and present and future intention, to thwart and obstruct their efforts to cancel whenever they would attempt to do so.”

Amazon has denied violating any laws, saying the cases were filed “without reviewing a single document from Amazon, resulting in a fundamental misunderstanding and mischaracterization of how Amazon’s businesses work.”