Amazon has to repay nearly $ 62 million in driver tips that it has skimmed over the years, federal agencies said Tuesday. The Federal Trade Commission published a complaint against the e-commerce giant on Tuesday alleging that Amazon’s Flex program stole nearly $ 62 million in tips from its driver army between 2016 and 2019.
“Instead of giving 100 percent of customer tips to drivers as promised, Amazon used the money itself,” said Daniel Kaufman, acting director of the FTC’s consumer protection bureau, in a statement.
The news of the settlement comes as Amazon founder Jeff Bezos said it wasa year of rapid growth for the e-commerce company.
Launched in 2015, Amazon Flex allowed ordinary people to sign up for shifts using their personal car to deliver Amazon packages. According to the FTC complaint, Amazon announced that drivers could earn $ 18-25 an hour in the program and earn tips on specific deliveries. The company announced to drivers that it would “give you 100% of the tips you earn”. According to the FTC complaint, customers were also told that “100% of your tips will be given to your courier”.
However, shortly after Amazon Flex launched, the company began scanning drivers’ tips, according to the FTC. In late 2016, the company secretly switched to a variable pay system where the drivers earned would fluctuate due to an internal algorithm, according to regulators. Under this system, the complaint said, Amazon could announce a payment of “$ 18- $ 24” for a given shipment. However, if a customer tipped $ 6, Amazon would only pay the driver $ 12 for a total of $ 18.
At that point, “Amazon decided to hide from drivers that it was lowering their pay and began reporting their earnings as a single lump sum that hid any distinction between customer tips and Amazon payment,” the complaint read. “Based on the information provided by Amazon, the drivers could not determine whether Amazon had contributed the minimum for the delivery block or a lower amount, nor could the drivers indicate the amount of a customer tip.”
Amazon has also stopped customers from giving cash. The app said “cash is not accepted on delivery”.
“Huge PR Risk”
Hundreds of drivers saw their wages drop and complained to Amazon, the FTC said, but the company replied to them with canned emails that “delivery partners are still making $ 18-25 an hour, including 100% customer tips” says the complaint. At the same time, Amazon employees have disseminated these complaints internally and recognized that the problem was “a major PR risk for Amazon,” the complaint said.
It wasn’t until the FTC announced to Amazon that an investigation was underway that the company changed its compensation practices and announced to drivers in August 2019 that it was rolling out an “updated results experience,” which is actually the Flex payment scheme, the Flex at used when it was first introduced.
Amazon did not admit any misconduct in the comparison. The company has to pay $ 61.7 million to the FTC, which the agency will distribute to drivers. The agreement also officially prohibits the company from lying about tips in the future and requires that it obtain driver consent before changing payment models.
“While we don’t think the historical way we reported the pay to drivers was unclear, we added additional clarity in 2019 and are excited to move this matter behind us,” said an Amazon spokesman to CBS News in a statement. “Amazon Flex delivery partners play an important role in providing day-to-day customer support, which is why they make over $ 25 an hour on average among the best in the business.”
FTC Commissioner Rohit Chopra called on the agency to impose further penalties and investigate whether Amazon has violated antimonopoly laws, noting that the alleged system “has likely brought significant benefits to the company”.
“”[T]This cannot be the only measure we take to protect workers and families from dominant middlemen. The FTC must also carefully examine whether technology platforms engage in anti-competitive behavior that deceives workers and kills law-abiding competitors, “Chopra said in a statement.” While Amazon.com is one of the largest, most powerful, and most feared companies in the world, it cannot be above the law. ”