On Tuesday, the District of Columbia filed a lawsuit against Amazon, claiming that the e-retailer violated the District’s Consumer Protection Procedures Act (CPPA) as a result of their business practices. Amazon is accused of using driver tips on their “Amazon Flex” delivery service in order to subsidize their driver payments.
According to the suit, “Amazon.com, Inc. and Amazon Logistics, Inc. solicited tips from its customers who placed orders for delivery by representing, as a reasonable consumer would assume, that each dollar tipped would increase delivery driver compensation. In fact, Amazon diverted a significant portion of those so-called tips to subsidize its own labor costs without actually increasing driver compensation by the amount tipped.”
When the Flex program started in 2015, Amazon allegedly correctly stated that drivers would receive 100% of tips left for them in the app by the customer. For that year and most of 2016, that statement remained true. However, a new payment program introduced by Amazon in late 2016 changed that, the complaint recounts.
Amazon changed the way it displayed tips to drivers so that drivers could no longer see how much each consumer had tipped, concealing the base pay rate on the delivery set by Amazon. According to the District, the this Variable Base Pay was the minimum amount that Amazon would pay the driver, and was known only to the company.
According to the complaint, “Amazon used ‘tips’ to make up the difference between the amount Amazon had secretly decided to pay the driver (the Variable Base Pay) and the amount that Amazon had advertised to the driver (the Guaranteed Minimum Payment). Amazon’s share of the driver’s payment for completing the delivery therefore fluctuated depending on the amount of the tip a consumer decided to leave for a driver.”
According to the complaint, Amazon has paid restitution as part of a settlement with the Federal Trade Commission, but agency commissioners stated that the conduct warranted penalties if the agency were empowered to issue them.
The complaint seeks restitution, civil penalties, a declaration of CPPA violations, and an injunction against the defendant.
