Amazon has agreed to a $2.5 billion settlement with the Federal Trade Commission over charges that it knowingly trapped customers into paying for Prime subscriptions, the agency announced Thursday.
The ecommerce giant will pay a $1 billion civil penalty and pledge another $1.5 billion in refunds to customers who were harmed by its conduct, the FTC said in a release.
Amazon will also “cease unlawful enrollment and cancellation practices for Prime.”
About 35 million consumers were affected by Amazon’s alleged misdeeds.
Amazon will pay up to $51 per customer with a valid claim.
The company, which could have faced even steeper fines and refunds if it had lost the case in court, denied wrongdoing on behalf of itself and its executives.
FTC Chairman Andrew Ferguson described the settlement – announced just three days after the jury trial began in Washington federal court – as a “record-breaking, monumental win for the millions of Americans who are tired of deceptive subscriptions that feel impossible to cancel.”
“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,” Ferguson said in a statement.
“Today, we are putting billions of dollars back into Americans’ pockets, and making sure Amazon never does this again.”
An Amazon spokesperson said the company had already implemented the changes outlined in the FTC’s release – with many put in place years ago.
“Amazon and our executives have always followed the law and this settlement allows us to move forward and focus on innovating for customers,” Amazon spokesperson Mark Blafkin 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,” the statement added. “We will continue to do so, and look forward to what we’ll deliver for Prime members in the coming years.”
The FTC began looking into Amazon’s practices during President Trump’s first term in office and eventually filed suit in 2023 under then-chair Lina Khan, with the company and three of its executives named as defendants.
The agency alleged that Amazon enrolled millions of customers into costly Prime memberships without their consent and then purposefully made it difficult to cancel the accounts.
As part of the settlement, two of the executives — Neil Lindsay and Jamil Ghani – must refrain from unlawful conduct.
The FTC said Amazon will be required to add a button to its website with obvious language for customers to decline signing up for Prime – rather than the current language of “No, I don’t want Free Shipping.”
The company also must make it easier for existing customers to cancel their accounts and submit to third-party audits to ensure compliance with the settlement terms.
The Amazon case was one of several high-profile actions underway at the FTC, which is also attempting to break up Mark Zuckerberg’s Meta and recently sued Ticketmaster over high concert fees and allegedly turning a blind eye to bot activity on its website.
The $2.5 billion settlement is the second-largest ever secured by the FTC, the agency said.
With Post wires
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