How Amazon Swindled Its Own Drivers, Got Caught, and Ended Up Richer

The company’s $62 million FTC settlement shows ‘corporate crime pays’

An Amazon Flex driver delivers packages in Cambridge, Massachusetts, on December 18, 2018. Photo: Boston Globe/Getty Images

One of the world’s richest companies was accused of systematically shortchanging some of its lowest-paid, most precarious workers. It got sued by the U.S. government. It eventually agreed to pay back the money it had pocketed. And it came out billions richer in the end.

That’s the ugly bottom line of Tuesday’s news that Amazon has agreed to pay $62 million to the Federal Trade Commission (FTC) to settle charges that it essentially pocketed customer tips intended for contracted Amazon Flex drivers — conduct that FTC commissioners called “outrageous.” The money represents the amount it diverted from those drivers, and the FTC said it will distribute it to those affected. In the hours after the announcement, Amazon’s stock actually rose by 1%-2%, adding roughly $20 billion to the company’s market value. (Its stock rose further in after-hours trading when Jeff Bezos announced he’s stepping down as CEO, a move that appeared unrelated to the settlement.)

The drivers, working for a guaranteed minimum hourly rate and using their own vehicles, were told they would keep 100% of customer tips. Customers using the Prime Now and Amazon Fresh apps were also told that 100% of their tips would go to drivers. But the Los Angeles Times’ Johana Bhuiyan reported in February 2019 that Amazon was in some cases siphoning off those tips and putting them toward drivers’ guaranteed base pay instead, following reports of similar practices by DoorDash and Instacart.

Some clever Amazon Flex drivers had uncovered the scheme by tipping themselves in specific amounts to see if those tips would show up in their pay. (They didn’t.) Even so, Amazon refused to acknowledge the arrangement at the time and only stopped doing it in August 2019, after learning the FTC had opened an investigation. In fact, Amazon allegedly “went to great lengths to ensure that no one would figure out what it was doing, by changing the way it presented earnings to drivers and drafting misleading answers for service representatives to give to drivers upset at being short-changed,” according to a joint statement from two FTC commissioners on Tuesday.

CEO Jeff Bezos’ personal net worth likely grew by more than a billion dollars on Monday as a result of the company’s stock gains after the settlement.

The $62 million settlement represents the amount that Amazon is estimated to have diverted from its drivers… and that’s it. There is no additional fine or punishment, as the FTC said that the law under which it sued Amazon — the FTC Act — does not give it the authority to impose direct penalties in this sort of case.

As a result, the financial hit to Amazon amounts to essentially nothing, whereas the amount it withheld from drivers may have impacted their ability to pay for things like food and basic health care. (Amazon Flex drivers do not receive benefits. A driver talked with OneZero in March 2019 about what the job is like; though his review was generally positive, at least compared to other contract driving gigs, he did complain about Amazon’s lack of transparency.)

In fact, as FTC commissioner Rohit Chopra pointed out in a statement Tuesday, Amazon likely realized a substantial net benefit from its shady dealings:

First, by promising a higher base pay initially, Amazon was likely able to recruit drivers more quickly, particularly as the company tried to stand up Amazon Flex in time for the holiday season. Second, and most directly, Amazon’s bait-and-switch allowed the company to pocket more than $60 million in workers’ tips. And finally, by allegedly misleading its workers about their earnings, the company made it less likely that drivers would seek better opportunities elsewhere, helping Amazon attract and retain workers in its quest to dominate.

Meanwhile, a quick back-of-the-envelope calculation suggests that Bezos’ personal net worth likely grew by more than a billion dollars on Monday as a result of the company’s stock gains after the settlement.

While characterizing the settlement as a “very good outcome,” given the constraints, FTC Acting Chair Rebecca Kelly Slaughter and commissioner Noah Joshua Phillips both said in a call with reporters Tuesday that the case highlighted the need for additional deterrent powers. Slaughter, a Democratic appointee, and Phillips, a Republican appointee, both called on Congress to give the FTC the power to fine companies that are found to be deceiving gig-economy workers. “I’d like to see a one-two punch,” Slaughter said. “I’d like to see us get money back to people who have been harmed, and I’d like to see us have the stick of a penalty to deter that wrongdoing from happening to begin with.”

“Right now, corporate crime pays. That’s why it’s so rampant.”

Chopra, who is Joe Biden’s nominee to lead the Consumer Financial Protection Bureau, agreed that Amazon preying on workers “justifies punitive measures far beyond the restitution provided here.” He went on to argue that the FTC in the meantime should activate “dormant” authorities that it already possesses in order to assess civil penalties. He also noted that the settlement does nothing to prevent the FTC and other authorities from pursuing antitrust investigations of Amazon.

What the settlement shows above all is that the system is broken, said Stacy Mitchell, co-director of the nonprofit Institute for Local Self-Reliance and a leading advocate for breaking up Amazon. “Unless the FTC begins to impose penalties at a scale that matters, there’s no deterrence,” Mitchell told OneZero. “Right now, corporate crime pays. That’s why it’s so rampant.”

At best, today’s settlement could be a sign of change to come, Mitchell added. “Historically, the FTC has done almost nothing to stop dominant corporations from abusing workers. So this is a step in the right direction, and I hope it portends much more aggressive action against Amazon and other monopolistic firms.”

Senior Writer, OneZero, at Medium

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