FTC urges judge to hold Amazon in 'bad faith' for withholding evidence

(CN) — The Federal Trade Commission on Wednesday urged a judge to find that Amazon.com Inc. acted in “bad faith” by falsely claiming that tens of thousands of documents that the commission requested in its investigation of Amazon’s Prime membership policies were somehow privileged legal communications.

U.S. District Judge John Chun, a Biden appointee based in Seattle, did not rule at the hearing but said he would issue a written decision.

The judge had already granted the FTC an additional 90 days for discovery and ordered Amazon to pay attorney fees due to the company’s late disclosure of meeting notes and other evidence. FTC attorney Jonathan Cohen argued that the commission wouldn’t be “made whole” without an additional bad faith finding.

Such a finding, Cohen said, would be highly probative for the commission to prevail on its equitable estoppel argument—a legal doctrine that can preclude a party from asserting specific facts in a lawsuit because of previous misrepresentations—and extend the statute of limitations for its claims against the internet retail behemoth.

According to Cohen, this could potentially make an additional $400 million in redress available to Amazon Prime subscribers.

In addition, the FTC attorney told the judge that a finding of bad faith might increase the civil penalties Amazon could face and serve as a deterrent for similar discovery violations.

“Bad faith is relevant to defendant’s culpability,” Cohen said.

Amazon attorney Moez Kaba argued the FTC raised equitable estoppel, civil penalties and deterrence for the first time at the hearing, after Amazon had already agreed to the May order granting the FTC extra time for discovery and covering its legal costs.

“Amazon agreed to do a re-review of its privilege logs without a court order and without delay,” Kaba argued. “That was a huge effort, but we did it. And that’s why the FTC now has all these documents.”

The FTC seeks to sanction Amazon for violating its obligations to turn over evidence in a lawsuit that claims the company tricked, coerced, and manipulated consumers into subscribing to Amazon Prime by failing to disclose the material terms of the subscription clearly and conspicuously and by failing to obtain the consumers’ informed consent before enrolling them.

The commission also claims that Amazon did not provide simple mechanisms for subscribers to cancel their Prime memberships, which bring in billions of dollars in revenue for the company.

“The overwhelming majority of Amazon’s privilege claims were baseless,” the FTC said in its request for sanctions. “It is now apparent that Amazon purposefully abused privilege claims to keep inculpatory documents from the FTC.”

Attorney-client communications are typically protected, and a litigant can’t be compelled to hand these over to their opponent in a lawsuit. However, according to the FTC, Amazon improperly withheld approximately 92% of relevant documents by mislabeling them as privileged.

One belatedly disclosed document revealed that, in a 2020 meeting, Amazon retail CEO Doug Herrington referred to “subscription driving” as a “shady world” and described Jeff Bezos as Amazon’s “chief dark arts officer” in that context.

“Stunningly, Amazon withheld this portion of the document from the FTC as privileged even though it did not contain any attorney-client communications,” the commission said.

Amazon responded to the FTC’s motion, stating that it was unnecessary and that it was primarily dedicated to an inflammatory “background” full of insinuations and colorful rhetoric.

“Indeed, the motion appears designed primarily to draw public attention,” Amazon said.

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