The Federal Trade Commission (FTC) announced on Thursday a landmark $2.5 billion settlement with Amazon, ending a two-year legal battle over allegations that the retail giant misled millions of consumers into signing up for its Prime subscription service and deliberately made canceling the membership excessively difficult.
Breakdown of the Settlement
- Amazon will pay a $1 billion civil penalty—the largest ever imposed by the FTC for an online subscription violation.
- An additional $1.5 billion will be refunded to an estimated 35 million affected Prime members, providing approximate compensation of up to $51 per eligible customer.
- The settlement also enforces critical changes to Amazon’s Prime subscription process, aimed at preventing deceptive enrollment and simplifying cancellation procedures.
What the FTC Found
The FTC’s lawsuit, initiated in 2023, accused Amazon of using “dark pattern” user interface designs that tricked users into enrolling in Prime without explicit consent. Internal documents revealed employees describing subscription-driving tactics as “a bit of a shady world” and cancellation hurdles as “an unspoken cancer.” The FTC argued these obstacles exploited consumers and violated the Restore Online Shoppers’ Confidence Act (ROSCA).
Key Changes Amazon Must Implement
- Inclusion of a clear and conspicuous option to decline Prime membership during checkout; the previous “No, I don’t want free shipping” option is banned.
- Full transparency about Prime’s costs, auto-renewal features, billing frequency, and cancellation policies on enrollment pages.
- Cancellation must be as easy as enrolling, with the same method available for both, free of undue steps or costs.
- Appointment of an independent third-party monitor to oversee compliance with settlement terms and consumer redress distribution.
Amazon’s Response and Business Impact
Amazon has not acknowledged wrongdoing as part of the settlement and declined comment regarding the FTC announcement. Despite the ongoing trial, Amazon’s stock opened steady on the news. The Prime subscription service is a major revenue pillar, boasting 200+ million members worldwide and generating over $12 billion annually in subscription revenue. Prime offers expedited shipping, exclusive deals, entertainment, and grocery benefits, making it a cornerstone of Amazon’s retail ecosystem.
Statement from FTC
FTC Chairman Andrew N. Ferguson called the settlement a “historic win” for American consumers fatigued by deceptive subscription practices. He emphasized the agency’s commitment to combating companies that “cheat ordinary Americans out of their hard-earned pay.” The monetary judgment ranks as one of the largest civil penalties secured under ROSCA.
Background:
The trial in Seattle had just commenced earlier this week before the unexpected settlement. The FTC’s investigation began in 2021, focusing on Amazon’s alleged use of manipulative enrollment tactics and the unnecessarily complex cancellation process that trapped consumers, forcing many into unwanted renewals.
This settlement sets a precedent for online subscription transparency and consumer protection, signaling intensified regulatory scrutiny on large digital platforms. Millions of Amazon Prime users impacted by these practices can expect timely compensation in the coming months.
