Amazon has agreed to pay $2.5 billion to settle a lawsuit from the Federal Trade Commission (FTC) over allegations that it duped users into paying for Prime subscriptions and made it hard to cancel memberships.
The company will be required to pay a $1 billion civil penalty and provide $1.5 billion in refunds to an estimated 35 million consumers harmed by the company’s “deceptive Prime enrollment practices,” the FTC says. Amazon is also required to stop its “unlawful enrollment and cancellation practices.”
The suit, filed in June 2023 under the Biden administration, claimed that Amazon created confusing and deceptive user interfaces to lead consumers to enroll in Prime without their knowledge. It also created a complex process for consumers looking to cancel their subscription by making them go through unnecessary steps, the FTC alleged.
The settlement comes as Amazon and the FTC had just begun the trial this week, during which a jury was supposed to decide the outcome.
“The evidence showed that Amazon used sophisticated subscription traps designed to manipulate consumers into enrolling in Prime, and then made it exceedingly hard for consumers to end their subscription,” said FTC Chairman Andrew N. Ferguson in a press release. “Today, we are putting billions of dollars back into Americans’ pockets, and making sure Amazon never does this again.”
As part of the settlement, Amazon is required to include a clear button for customers to decline signing up for Prime. This means that the company can no longer have a button that says “No, I don’t want free shipping.”
Amazon must also clearly disclose the subscription cost during the enrollment process, along with the billing date and frequency, whether the subscription auto-renews, and the procedure for cancellation. Additionally, the company is required to create an easy way for consumers to cancel Prime, using the same method that consumers used to sign up for the service.
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“Amazon and our executives have always followed the law and this settlement allows us to move forward and focus on innovating for customers,” Amazon said in a statement. “We work incredibly hard to make it clear and simple for customers to both sign up or cancel their Prime membership, and to offer substantial value for our many millions of loyal Prime members around the world. We will continue to do so, and look forward to what we’ll deliver for Prime members in the coming years.”
The settlement is one of the largest in the FTC’s history. In 2019, Facebook (now Meta) reached a $5 billion settlement with the agency for violating consumers’ privacy.
It’s worth noting that Amazon still faces another federal lawsuit, in which the FTC has accused the company of illegally stifling competition on its way to becoming a ubiquitous retail presence and one of the world’s most valuable companies.
