Amazon Snuck Promoted Products Into Its Baby Registries: Lessons for In-House Lawyers

Ed note: I wrote this in 2019 and published it to my earlier blog. It's still relevant, so I'm reposting it here.

From a WSJ article titled “New Parents Complain Amazon Baby-Registry Ads Are Deceptive”:

Kima Nieves recently received two Aveeno bath-time sets and a box of Huggies diapers through her baby registry on Amazon. The only problem? The new mother didn’t ask for the products, or even want them.

. . . . The ads look identical to the rest of the listed products in the registry, except for a small gray “Sponsored” tag. Unsuspecting friends and family clicked on the ads and purchased the items, assuming Ms. Nieves had chosen them.

“Very sneaky,” said the 28-year-old health-care analyst from Fredericksburg, Va. “That’s friends’ and family’s money going somewhere we didn’t approve of.”

. . . .
Amazon sells three so-called native baby-registry product placements each quarter for $500,000 each while requiring advertisers to spend $500,000 to $3 million more on other Amazon ads . . . .

What happened!? Did Amazon’s lawyers screw up? Did its business folks ignore the lawyers? Or was this ad placement a wise move that only looks bad in hindsight?

Maybe the Lawyer Misread the FTC’s Online Advertising Rules.

The FTC hasn’t been shy about telling companies the rules around deceptive online advertising. They’ve published How to Make Effective Disclosures in Digital Advertising, Enforcement Policy Statement on Deceptively Formatted Advertisements, and this Letter to General Search Engines. (They’ve provided the same or similar guidance so frequently that I can’t help but imagine the FTC lawyers thinking to themselves “how many times do we have to tell these Internet dummies!?”).

For native ads, the FTC will “scrutinize the entire ad, examining such factors as its overall appearance, the similarity of its written, spoken, or visual style to non-advertising content offered on a publisher’s site, and the degree to which it is distinguishable from such other content.” Enforcement Policy Statement at 11 (emphasis added). “The conspicuousness of the [required] disclosure will depend on the method of delivery and placement within the ad. Depending on the circumstances, a disclosure in the text may not remedy a misleading impression created by the headline because reasonable consumers might glance only at the headline.” Id. at 13.

Let’s apply the “degree to which it is distinguishable from other content” test. Here’s how Amazon presented these $500K-per-calendar-quarter ads:

Maybe it’s just me (and the people the WSJ interviewed), but it took me a minute to spot the ad. It’s the one on the top left marked “Sponsored(i).” By way of comparison, here’s how Twitter, Instagram, and Google distinguish native ads from the rest of their content:

I give Amazon’s effort a D-. I mean, it does say “Sponsored” but there’s a bunch of things that suggest that isn’t enough:

1. Consumers don’t expect ads on a baby registry from Amazon the way they would in an Instagram feed. See Enforcement Policy Statement at 11-12 (“In evaluating whether reasonable consumers would recognize ads as such, the Commission will consider the particular circumstances in which the ads are disseminated, including customary expectations based on consumers’ prior experience with the media in which it appears and the impression communicated by the ad’s format.”) (emphasis mine).
2. Typical users aren’t repeat baby-registry users the way Twitter users are repeat Twitter-users, so there is no mechanism for them to learn to be on the lookout for these ads. Id.
3. Unlike the Twitter, Instagram, and Google examples, there’s nothing in the content of the ad that suggests it is an ad. For example, because I don’t follow Spotify on Twitter, seeing the post from it is enough to clue me into the fact that it is an ad.
4. (This is the worst fact) The “0 of 1 Purchased” language at the bottom of the promoted product is sneaky because it makes it appear as if the new parent requested it!

Given all those factors, it’s extremely difficult for me to imagine that Amazon lawyers, who are some of the best in the business, reviewed the FTC rules and said: “go for it, the gray ‘sponsored’ is enough.”

Maybe the Lawyer Correctly Analyzed the Legal Issues but the Business Person Ignored that Advice.

Unless something is outright and obviously illegal, like fraud, as a lawyer you’d like to not have to tell someone not to do something. Instead, you want to advise on the risks and be able to say, for example, “if you do X, there’s a Y chance it will be found illegal and these Z bad things will result” and then the business person will take that information and rationally decide whether the value of doing the thing is greater than the probability that something will go wrong.

But this doesn’t always work if the risk is “your company’s reputation will take a hit” and the probability of that happening is sufficiently low.

Lawyer: Your proposed design is likely illegal under the FTC guidance but there’s a small chance that it isn’t and a major newspaper may call Amazon out for being shady and that will cause Amazon as a whole to take a PR hit. You decide whether you want to do it.
Businessperson: But it’s not illegal? You’re saying I can do it?
Lawyer: It’s not fraud. It might well be illegal. I’m telling you there’s a risk and you should decide whether it is a risk worth taking.
Businessperson: [taps fingers together] OK there’s a 100% chance I can generate a bunch of revenue and my bonus is based on revenue and there’s a 5% chance it will go sideways. If it does I can always find another job and I really want to get a down payment together now because Seattle real estate is getting more and more expensive . . .
Lawyer: I mean, I don’t think that’s the right way to think about it.
Businessperson: Are you still here? I was talking to myself.

To its credit, Amazon has leadership values aimed to avoid this type of short-term thinking. Here are two relevant ones (with my emphasis):

Customer Obsession
Leaders start with the customer and work backwards. They work vigorously to earn and keep customer trust. Although leaders pay attention to competitors, they obsess over customers.

Ownership
Leaders are owners. They think long term and don’t sacrifice long-term value for short-term results. They act on behalf of the entire company, beyond just their own team. They never say “that’s not my job”.

But a business person can ignore these values just as easily as she can ignore the legal advice. That doesn’t mean they are worthless. They certainly give the lawyer additional ammunition to push back (“Is this really in keeping with customer trust and in Amazon’s long-term interest!?”) and a reason to escalate the issue.

Maybe I’m wrong and this Design Was a Rational, Positive Expected-Value Decision.

Just because this went sideways doesn’t mean it was a bad ex-ante decision. Here’s another way the conversation could have gone:

Lawyer: This design is surely deceptively illegal but the FTC hasn’t brought an enforcement action in a situation like this in a really long time.
Businessperson: I don’t want to do it if it’s illegal.
Lawyer: Well, jaywalking is illegal but people do it all the time.
Businessperson: Ok. But what if there’s bad PR?
Lawyer: If customers complain, they will likely write to our customer support team first and then we can change the design before it gets to the tech journalists or the Wall Street Journal. And, even if it does get that far, Amazon has a good reputation, so it shouldn’t cause much lasting damage.

Maybe the lawyer is right? In terms of legal risk, the FTC’s enforcement division isn’t very scary these days. To put it another way, even with this WSJ story, does anyone expect the FTC to do anything about this Amazon baby registry?

To finish the legal analysis, a consumer class action suit is also possible and there’s a risk that a state AG will go after Amazon. I admit that I don’t know much about that risk. Are they particularly active in this area? I don’t think so, but I don’t know for sure.

Finally, maybe my sensitivity to bad PR is overblown. That is also the subject of another post.

In short, if I was an attorney at Amazon, I would’ve been very clear about the downside risks and escalated my concerns until I thought someone with a sufficiently long-term view heard me out. That’s because I don’t relish seeing a design I counseled generate negative press in a national newspaper; I also don't want to trick people into buying products parents don't need.