Today, as Amazon dealt with a site-wide outage affecting thousands of customers, District of Columbia Attorney General Karl Racine filed a lawsuit against the online shopping giant for misled his customers. In a press release, Racine said Amazon still has to pay for tricking DC consumers into “stealing” portions of their Amazon Flex delivery driver tips between 2016 and 2019 and “secretly” embezzling millions for “reduce its own labor costs and increase its profits.”
Amazon has already paid $61.7 million in compensation to Amazon Flex drivers after the Federal Trade Commission investigation. But Racine said Amazon “has so far escaped appropriate liability, including civil penalties, for consumer harm.” In his complaint, filed in the Superior Court of the District of Columbia, Racine seeks, to date, “civil penalties in connection with the false statements and omissions he made to consumers regarding these deceptive tipping practices”.
“When a company is caught stealing from its workers, it is not enough for the company to repay the amount stolen,” Racine’s complaint said. “Stealing from workers is theft, and significant penalties are needed to strongly deter this illegal conduct.”
A spokesperson for Racine’s office told Ars that Amazon had three weeks to respond to the court filing. An Amazon spokeswoman, Maria Boschetti, issued a statement to Ars.
“Nothing is more important to us than customer trust,” Boschetti told Ars. “This lawsuit concerns a practice that we changed three years ago and is without merit. All of the tips from the customers at issue have already been paid to the drivers as part of a settlement last year with the FTC.
Racine’s complaint alleges that Amazon violated DC’s Consumer Protection Procedures Act (CPPA) by “lying to consumers about whether tips would be fully passed on to Amazon Flex drivers and increase compensation. workers”. Because customers received no restitution from the FTC settlement, Racine’s complaint suggests it is now up to the court “to send a clear message to employers not to misuse tips for their own benefit.” .
Amazon’s tip diversion scheme worked by quoting a guaranteed minimum payment to a driver and then offsetting that payment with tips instead of providing tips in addition to the minimum payment. To ensure Amazon paid the least amount of fees, the complaint alleges the company even tested models with different default tip options, ultimately selecting the amount that led customers to cover as many costs as possible. . Racine’s complaint said this caused “a consumer’s ‘tipping’ to make no difference to the driver’s take-home pay”, and drivers only noticed this happening because they “noticed a decrease of their net salary. The FTC reported that the highest amount of tips withheld from a single Amazon Flex driver was “over $28,000”. The average amount of tips withheld was $422.
According to the FTC, Amazon agreed in the 2021 settlement never to misrepresent a driver’s rate of pay or likely income, “how much tip will be paid to them” or “whether the amount paid by a customer is a tip” . The FTC also prohibited Amazon “from making changes to the way a driver’s tips are used as compensation without the express informed consent of the driver.” Amazon must comply with these national orders until 2041.
Racine’s concern, however, is that Amazon has given no assurances to customers that it will not engage in such deceptive practices. In his complaint, he notes that before, during and after the settlement, Amazon never stopped telling customers that 100% of the tips would go to the drivers. Sometimes it was true, but for three years it was not, and there was no enforcement action to prohibit “unfair and deceptive business practices in connection with the offer, sale and supply of consumer goods and services”.
The DC attorney general asked the court to declare that Amazon violated the CPPA. In the event of a violation, Racine is asking the court to award any restitution not already provided, along with civil penalties, as punishment to prevent Amazon from any future violations of the CPPA. This is the only way, the complaint states, “to deter Amazon and other merchants from soliciting tips from DC consumers to subsidize their own labor costs.”
“Consumers need to know where their tips are going,” Racine said in his press release. “This lawsuit is about giving workers the tips they are owed and telling consumers the truth. Amazon, one of the richest companies in the world, certainly doesn’t need to take tips that belong to the workers. Amazon can and should do better.
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