Update: Putative Class Action Against Amazon Dismissed with Prejudice
We reported on this case back in May. The case was brought on behalf of a class of Amazon Prime subscribers. Amazon’s terms of use provided that “any increase in subscription fee will not apply until your subscription is renewed.” Nonetheless, Amazon added commercials to its streaming service, and members were offered the opportunity to avoid watching commercials by paying an additional $3/month. One might conclude, having consulted common sense, that when you have to pay an addition $3/month to enjoy the same services that Amazon was contractually obligated to provide, that amounts to an increase in the subscription fee.
Plaintiffs amended, but to no avail. Last month, in In re Amazon Prime Video Litigation, the District Court once again dismissed plaintiffs’ claims, this time with prejudice. Plaintiffs adjusted their argument this time, claiming that the addition of commercials to the streaming service was an improper modification of a membership benefit. The Terms of Use specify five reasons why Amazon “may” modify services, and Plaintiffs contended, none of the enumerated reasons apply. However, the Term of Use also provide that “Amazon reserves the right to suspend, or discontinue the Service, or any part of the Service, at any time without notice.”
Plaintiffs argued that the use of “may” means that Amazon is only permitted to modify its services for the five enumerated reason. The District Court concluded otherwise. The list is not exhaustive, because Amazon preserved for itself the right to modify services for any reason and without notice. What then, pray tell, was the point of the enumeration? The meaning of “may,” in this context, instructs the Court, is “permissive not restrictive.” To adopt the plaintiffs’ interpretation would require the Court to ignore language peppered throughout the Terms of Use granting Amazon the power to amend the Terms of Use at any time. That is undoubtedly so, but it does not explain the point of the enumeration.
In any case, the Court concludes that Amazon has shown that its modification is indeed within the enumeration because increasing the subscription price modifying the member benefits “will allow [Amazon] to continue investing in compelling content and keep increasing that investment over a long period of time.” That explanation either falls within permissible ground 4 for modification, “to improve existing, or add new, functionality and/or features,” or permissible ground 5 for modification, “to support maintaining quality and quantity of content included in the Service.” Plaintiffs offered a different explanation for the price increase modification of services: Amazon wanted to generate more revenue. The Court rejected that contention as speculative, but it has the ring of truth to me. At best, I would argue, Amazon’s self-serving justification for its price increase modification of member benefits merely creates a disptued issue of fact to be resolved at trial. Such disputed issues of fact ought not to be resolved on a motion to dismiss.
Having found no breach of contract, the court also found no breach of the duty of good faith and fair dealing. Plaintiffs did not purchase ad-free Prime Video, nor did they purchase Prime Video that was ad-free and would remain so during the subscription period. Rather, they purchased Prime Video that was, at the time they purchased it, ad-free but could have ads added if Amazon chose to do so. There is no requirement that Amazon exercise its discretion to modify its terms reasonably. Nor did Amazon violate consumer protection laws by performing a “bait and switch.” Plaintiffs were on notice that the terms could change, and they did.
I think this is wrong, for what it’s worth. When terms of service include the right to modify terms in the sole discretion of the vendor, the vendor’s promise is illusory but for the duty of good faith and fair dealing. Either the vendor only amends the terms of service in a reasonable manner or they are in breach of the duty of good faith and fair dealing. But what do I know?
The courts message to plaintiffs if very simple: Sorry suckers. My wife and I recently decided not to renew our Amazon Prime subscription, choosing to donate the money instead to the union seeking to organize Amazon workers. The decision had nothing to do with this case, but this case does give me another reason to think we exercised our discretion reasonably.