Amazon may have poked a sleeping bear when it ended free Whole Foods delivery on Prime last September. A pair of class-action lawsuits are threatening to force the marketplace to refund potentially thousands of Prime customers for removing the service and tacking on a $9.95 service fee.
One suit filed in a Washington court in late May alleges that Amazon (NASDAQ: AMZN) “engaged in unfair business practices” by not reducing the cost of its Prime subscription or issuing refunds after ending free Whole Foods delivery.
“Hundreds of thousands, if not millions, of Amazon Prime members paid for a membership because they wanted to take advantage of Prime’s free Whole Foods delivery service,” the text of the lawsuit reads. “As a result of Amazon’s unfair business practices, consumers paid $119 for a service that was unfairly terminated. Prime members did not receive the benefit of their membership bargain.”
A second class-action suit filed in the same court in June accuses Amazon of misleading customers, claiming that the company falsely represented its “Free Delivery” and “Free 2-Hour Grocery Delivery” services. The suit also alleges that Amazon misled shoppers by concealing some product fees until the end of the purchasing process, a practice called “drip pricing.”
“Amazon engages in a bait-and-switch advertising scheme by not disclosing the $9.95 service fee along with the advertised price of the Whole Foods grocery items,” the second lawsuit reads. “Amazon advertises groceries from Whole Foods at a certain price and then tacks on a mandatory ‘service fee’ later in the ordering process after the consumer is already invested in the ordering process.”
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Customers in both lawsuits feel that they’ve been duped into overpaying for Prime memberships. Amazon announced its acquisition of Whole Foods in June 2017, adding free two-hour delivery for Prime customers on grocery orders over $35 in February 2018. The move was generally praised by analysts as a way for the marketplace to retain customers in the notoriously competitive grocery space.
That April, Amazon raised the price of Prime subscriptions for the first time in four years and just the second time in its history, increasing the cost of the annual membership from $99 to $119. But after replacing free Whole Foods delivery with a $9.95 service fee last September, the company may have bitten off more than it could chew.
Plaintiffs say that by implementing the price hike, Amazon did not provide all of the perks promised under its $119 subscription and violated Washington State’s Consumer Protection Act. According to the suit, customers who had used Prime services at least once during their annual membership period were not entitled to any refunds whatsoever after cancellation.
“Amazon has engaged in unfair business practices, breached its duty of good faith and deprived Prime members of the benefit of their bargain,” the lawsuit alleges.
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But just a few months ago, Amazon hiked prices for a third time, from $119 to $139. The increase went into effect for existing Prime customers on March 25 and is the likely catalyst for the second class-action suit.
The second lawsuit alleges that ads in print, TV and on Amazon’s website were misleading, promising “Free Delivery” and “Free 2-Hour Grocery Delivery” but hiding the $9.95 service fee late in the ordering process. It also claims that Amazon was not clear in telling customers how to opt out of an optional $5 tip, which it automatically applies to grocery orders.
Shoppers “would have wanted to know, as would any reasonable person, that [Amazon] charges a service fee in connection with grocery deliveries from Whole Foods Market,” the lawsuit read. “And this information would have changed their and any reasonable customer’s decision to purchase” a Prime membership.
Unlike the suit filed in May, the more recent class action could include Prime users who signed up for the service after free Whole Foods delivery was removed. That’s because the first suit makes no claims of false advertising — it only alleges that Amazon broke its promise to customers. The second suit, though, claims that the promise itself was faulty, meaning newer customers would be able to jump on board.
Amazon did not immediately respond to Modern Shipper’s request for comment, nor did Triad Law Group or Wilshire Law Firm PLC — the two firms representing the plaintiffs who filed in May.
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