Amazon has agreed to pay a “historic” $2.5 billion settlement with the Federal Trade Commission after being accused of using deceptive methods and tricking customers into signing up for its Prime subscription service, making it difficult for them to cancel, the federal agency announced on Thursday.
How much did Amazon have to pay out in the settlement?
According to the settlement, Amazon will have to pay $1 billion in civil penalties and provide $1.5 billion in refunds to an estimated 35 million consumers, who were “harmed by their deceptive Prime enrollment practices,” the FTC said in a news release.
The civil fines represent the largest ever in a case involving an FTC rule violation, while the restitution to customers is among the highest the agency has ever secured, according to the agency.
“Today, the Trump-Vance FTC made history and secured a record-breaking, monumental win for the millions of Americans who are tired of deceptive subscriptions that feel impossible to cancel,” FTC Chairman Andrew N. Ferguson said in a statement.
“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. Today, we are putting billions of dollars back into Americans’ pockets, and making sure Amazon never does this again. The Trump-Vance FTC is committed to fighting back when companies try to cheat ordinary Americans out of their hard-earned pay,” he added.
Amazon says the company will maintain its value for its consumers
Amazon responded to the settlement, stating that despite the allegations, the company has always offered customers the option to opt out of Prime.
“Amazon and our executives have always followed the law and this settlement allows us to move forward and focus on innovating for customers,” the company 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 FTC-Amazon settlement explained
USA Today reported that the settlement comes just days before the Seattle trial between Amazon and the FTC was set to begin. The federal agency initially filed an antitrust lawsuit against the online retailer in June 2023, alleging that the company had enrolled millions of customers in Prime subscriptions without their consent, making cancellations difficult.
The FTC has accused Amazon and several executives of knowingly misleading consumers, which violates the FTC Act and the Restore Online Shoppers’ Confidence Act. Leading up to the trial, internal documents revealed that company executives and employees were aware that these practices were deceptive, describing them as “shady” and referring to unwanted subscriptions as “an unspoken cancer,” per its news release.
While Amazon has admitted to no wrongdoing, the company has agreed to make changes to its cancellation policies, making it easier for consumers to navigate wherever Amazon is used on their devices, according to another factor in the settlement.
Amazon will make changes to its cancellation policies
One way to help consumers is to have a visible button where they can clearly deny or opt out of the Prime subscription, saying, “No, I don’t want Free Shipping”; providing clear and conspicuous disclosures of the terms of Prime, including costs, charges and cancellation procedures; creating an easy way for consumers to cancel Prime, using the same method that consumers used to sign up and paying for an independent, third-party supervisor to monitor its compliance,” according to USA Today.
Amazon Prime, which costs $14.99 per month or $139 per year, generates billions in revenue and offers a wide range of benefits, including fast delivery, streaming entertainment, grocery delivery, as well as fuel and food deliveries, and same-day subscription deals, according to CNN.
Former FTC Chair Lina Khan discussed the settlement on Thursday in a post shared on X, formerly Twitter, about how she and the agency first sued Amazon two years ago over policy violations and that the company had more than enough money to pay the hefty judgment.
“A $2.5 billion fine is a drop in the bucket for Amazon and, no doubt, a big relief for the executives who knowingly harmed their customers,” Khan wrote in part.