Amazon will pay a historic $2.5 billion settlement over its Prime membership after U.S. regulators argued the company misled millions of users into paying for subscriptions that were intentionally difficult to cancel, the agency announced.
The Federal Trade Commission Thursday said Amazon has agreed to pay a historic $1 billion in civil penalties to the government, and another $1.5 billion in redress payments to affected customers. Those eligible to receive some of the settlement include customers who may have signed up for a membership through Amazon’s “Single Page Checkout” between June 23, 2019, and June 23, 2025.
The surprise settlement comes as Amazon and the FTC were three days into a trial in the tech giant’s hometown, Seattle, where a jury was set to determine whether Amazon broke the law.
The FTC, which regulates competition, brought a lawsuit against the company in 2023, accusing them of “knowingly misleading millions of consumers into enrolling in Prime,” the agency said.
The regulators also claimed that Amazon created a purposefully convoluted, multi-step cancellation process to keep users trapped in their subscriptions.
Under the settlement, Amazon is not allowed to misrepresent the terms of Prime. The company must now make clear disclosures about the terms of the program during enrollment, and have consumers express consent before charging them for a subscription.
The company can no longer have a button that says, “No, I don’t want free shipping” and must provide an easy way for users to cancel their subscription, the FTC said.
Amazon admitted no wrong-doing in the settlement. In a statement, spokesperson Mark Blafkin told The Independent, “”Amazon and our executives have always followed the law and this settlement allows us to move forward and focus on innovating for customers.”
“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,” he said.
FTC Chairman Andrew Ferguson praised the agreement as a “monumental win” for the agency, noting in a statement the FTC is “committed to fighting back when companies try to cheat ordinary Americans out of their hard-earned pay.”
“Today we are putting billions of dollars back into Americans’ pockets, and making sure Amazon never does this again,” Ferguson said.
The settlement is one of the largest ever imposed by the FTC, according to CNBC. In 2019, the agency hit Meta, then known as Facebook with a $5 billion fine for violating consumers’ privacy.
Amazon Prime provides subscribers with perks including faster shipping, video streaming, and discounts at Whole Foods supermarkets. The subscription costs $139 a year, or $14.99 a month.
What this means for you
Amazon Prime customers eligible to receive some of the $1.5 billion in redress payments include users who signed up for a membership through the company’s “Single Page Checkout.”
Customers were given the option to use that particular webpage between June 23, 2019, and June 23, 2025.
The $1.5 billion fund will be available to an estimated 35 million users who were hit with unwanted Prime memberships or deferred cancellation, according to Reuters.
Amazon will pay up to $51 to individual Prime subscribers who submit valid claims and could make additional payments, according to the report.
With reporting by the Associated Press.
