How Amazon Swindled Its Own Drivers, Got Caught, and Ended Up Richer
The company’s $62 million FTC settlement shows ‘corporate crime pays’
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.