Amazon to pay $2.5 bln over Prime sign-up, cancellation practices
3 Min Read
Amazon will pay $2.5 billion to settle FTC claims it misled millions into Prime sign-ups and made cancellation difficult, with $1.5 billion in refunds for customers.
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An Amazon company logo marks the facade of a building, March 18, 2022, in Schoenefeld near Berlin, Germany. (AP)
Amazon has agreed to pay $2.5 billion (£1.9 bln) to resolve a lawsuit brought by the US government, which accused the company of tricking millions of people into enrolling in its Prime membership program and making cancellation deliberately difficult.
The Federal Trade Commission (FTC) announced that $1.5 billion of the settlement will be distributed as refunds to customers who were misled into joining Prime. The agreement comes just days after a trial began in Seattle, marking the largest civil penalty ever secured by the FTC.
Amazon did not admit or deny the allegations. The company said it had “always followed the law” and agreed to the settlement to “move forward".
Prime, which offers free shipping, streaming services, and other benefits, costs $139 annually or $14.99 per month in the US, and £95 a year in the UK. Hundreds of millions globally subscribe to the service.
FTC accusations
The FTC accused Amazon of using “subscription traps”, including checkout pop-ups that steered customers toward Prime, failing to clearly disclose billing terms, and automatically enrolling users after one-month trials.
“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,” FTC Chairman Andrew Ferguson said. “Today, we are putting billions of dollars back into Americans' pockets, and making sure Amazon never does this again.”
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According to the FTC, up to 35 million US customers may be eligible for refunds, worth as much as $51 each. Automatic refunds will be issued to those who used Prime fewer than three times in a year, while others who used the service fewer than 10 times must file a claim.
Terms of the settlement
Amazon must simplify the cancellation process and will no longer be allowed to use misleading opt-out buttons, such as “No, I don’t want free shipping.”
The FTC cited internal Amazon communications acknowledging concerns, including one remark that “subscription driving is a bit of a shady world.”
Amazon spokesperson Mark Blafkin defended the company, saying, “We worked incredibly hard to make it clear and simple for customers to both sign up or cancel their Prime membership. This settlement allows us to move forward and focus on innovating for customers.”
Political, regulatory backdrop
The case was originally filed in 2023 under then-FTC Chair Lina Khan, who had pushed for greater scrutiny of big tech firms. Ferguson, appointed this year by President Donald Trump, has continued a tough stance on the sector.
Some critics said the FTC should have gone further by reinstating a “Click-to-Cancel” rule, introduced under the Biden administration but struck down earlier this year by an appeals court.
“Enough with this game of whack-a-mole,” said Nidhi Hegde, executive director of the American Economic Liberties Project. “If the Commission is serious about protecting people from deceptive subscription schemes, it should re-issue the Click-to-Cancel rule today.”
