Washington: District of Columbia (DC) Attorney General Karl Racine has sued e-commerce giant Amazon for stealing consumer tips worth $60 million from delivery drivers through a deceptive, illegal scheme.
In his lawsuit, Racine alleged that Amazon’s scheme tricked consumers into thinking they were increasing drivers’ compensation when “Amazon was actually diverting tips to reduce its own labour costs and increase profits”.
“Workers are too often taken advantage of and not paid their hard-earned wages. What’s more, consumers need to know where their tips are going. This suit is about providing workers the tips they are owed and telling consumers the truth,” Racine said in a statement late on Wednesday.
“Amazon, one of the world’s wealthiest companies, certainly does not need to take tips that belong to workers. Amazon can and should do better,” he added.
Last year, Amazon settled with the US Federal Trade Commission (FTC) after a lawsuit alleged it had withheld more than $60 million (or about one-third of total customer tips) from Amazon Flex drivers.
“While Amazon later reimbursed the Amazon Flex drivers as part of a settlement with the FTC, it has thus far escaped appropriate accountability, including any civil penalties, for consumer harm,” according to the lawsuit.
In 2015, the company launched its Amazon Flex service, which offers quick deliveries of Amazon products through Amazon delivery drivers.
During the checkout process, Amazon encouraged consumers to tip their delivery drivers, offering a default preselected tip amount and assuring consumers that 100 per cent of the tip amount would go to the drivers.
In 2016, Amazon allegedly changed its driver payment model so that a large portion of these tips did not go towards increasing drivers’ compensation but were instead used to pay a portion of what Amazon had already promised to pay the driver, according to the lawsuit.
“Amazon continued to assure consumers that 100 per cent of tips would go to drivers despite the fact that the company was secretly using these tips to subsidise its own labor costs and increase profits,” it added.
As a result of its deceptive tactics, Amazon experienced significant cost savings.
Amazon was yet to react to Racine’s complaint.