Amazon has agreed to pay $2.5 billion to settle a lawsuit from the Federal Trade Commission. The FTC alleged the company misled users into paying for Prime subscriptions and deliberately made it difficult to cancel those memberships.
As part of the settlement, Amazon will pay a $1 billion civil penalty and provide $1.5 billion in refunds to an estimated 35 million consumers affected by the deceptive enrollment practices. The company is also legally required to stop its unlawful enrollment and cancellation processes.
The lawsuit was originally filed in June 2023. It claimed that Amazon used confusing and deceptive user interfaces to trick consumers into enrolling in Prime without their clear consent. The FTC also alleged the company designed an unnecessarily complex cancellation process with multiple unnecessary steps.
The settlement was reached just as the trial was beginning this week, avoiding a jury decision. Under the new terms, Amazon must now include a simple and clear button for customers to decline signing up for Prime. The company can no longer use misleading language like a button that says “No, I don’t want free shipping.”
Amazon is also required to clearly disclose the full cost of the Prime subscription during enrollment, including the billing date, frequency, auto-renewal terms, and cancellation procedure. Furthermore, the company must create an easy cancellation method that mirrors the simplicity of the sign-up process.
The FTC Chairman stated that the evidence showed Amazon used sophisticated traps to manipulate consumers into enrolling in Prime and then made it exceedingly hard for them to cancel. He said the settlement returns billions of dollars to Americans and ensures Amazon cannot repeat these actions.
This settlement ranks among the largest in FTC history. In 2019, Facebook, now Meta, reached a $5 billion settlement with the agency for privacy violations.
It is important to note that Amazon still faces another major federal lawsuit. In that separate case, the FTC has accused the company of illegally stifling competition to maintain its dominant position in retail.