Amazon FTC Settlement: $2.5B Fine for Prime Deceptive Tactics

Amazon Settles FTC Lawsuit for $2.5 Billion

A $2.5 billion settlement has been reached between Amazon and the Federal Trade Commission (FTC). This resolves allegations concerning deceptive practices related to Prime subscriptions.

Details of the Settlement

The agreement mandates a $1 billion civil penalty payment by Amazon. Furthermore, $1.5 billion will be distributed as refunds to approximately 35 million consumers impacted by what the FTC describes as “deceptive Prime enrollment practices.”

Amazon is also obligated to cease its previously employed, “unlawful enrollment and cancellation practices.”

Allegations Against Amazon

The lawsuit, initially filed in June 2023, asserted that Amazon intentionally designed confusing user interfaces. These interfaces allegedly led consumers to unknowingly enroll in Prime memberships.

The FTC further claimed that Amazon created an unnecessarily complicated cancellation process. Consumers were required to navigate multiple, superfluous steps to terminate their subscriptions.

Timing of the Settlement

This settlement was finalized as the trial between Amazon and the FTC had just commenced. A jury was prepared to determine the case’s outcome.

FTC Chairman’s 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,” stated FTC Chairman Andrew N. Ferguson. “Today, we are putting billions of dollars back into Americans’ pockets, and making sure Amazon never does this again.”

Required Changes to Enrollment Process

As part of the agreement, Amazon must now prominently display a clear option for customers to decline Prime enrollment. The previous practice of using a button stating “No, I don’t want free shipping” is no longer permissible.

Transparency in Subscription Details

Amazon is now required to fully disclose the Prime subscription cost during enrollment. This includes the billing date, frequency of charges, auto-renewal status, and the cancellation procedure.

The company must also establish a simplified cancellation method. This method should mirror the process consumers utilized to initially sign up for the service.

Amazon’s Response

“Amazon and our executives have always followed the law and this settlement allows us to move forward and focus on innovating for customers,” Amazon stated. “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.”

Significance of the Settlement

This settlement represents one of the largest in the FTC’s history. Previously, in 2019, Facebook (now Meta) settled with the agency for $5 billion, related to privacy violations.

Ongoing Legal Challenges

It is important to note that Amazon currently faces another federal lawsuit. The FTC alleges that Amazon illegally suppressed competition during its growth into a dominant retail force and a highly valued global company.

Additional Information

• The settlement aims to provide relief to an estimated 35 million consumers.
• The FTC’s action focuses on ensuring fair and transparent subscription practices.
• Amazon is committed to continued innovation and customer satisfaction.