Amazon has reached a settlement totaling $2.5 billion with the Federal Trade Commission (FTC), which accused the company of trapping customers in unauthorized payments for their Prime subscriptions. This announcement came on Thursday.
The agreement includes a $1 billion civil penalty and a promise to refund an additional $1.5 billion to affected customers, as detailed by the FTC.
Alongside this, Amazon has agreed to stop what the agency called “illegal registration and cancellation practices” related to its Prime service.
Approximately 35 million consumers have reportedly been impacted by these allegations.
In terms of compensation, Amazon may pay up to $51 for each valid customer claim.
It’s worth mentioning that Amazon has not admitted to any fraud in this settlement.
If the company had lost in court, it could have faced even larger fines or refunds, but such a scenario remained off the table with this agreement.
FTC Chair Andrew Ferguson outlined the situation, highlighting that the settlement was made public just three days into a trial in Washington federal court.
So far, Amazon has not responded to requests for comments regarding this matter.
Ferguson stated, “The evidence indicated that Amazon implemented complex subscription traps aimed at enrolling consumers in Prime, complicating the cancellation process.” He added, “Today, we’re returning billions to Americans and ensuring that Amazon does not repeat these actions.”
The FTC’s investigation into Amazon’s practices began during President Trump’s administration, eventually leading to a lawsuit in 2023 under then-chairwoman Lina Khan.
The agency claims Amazon signed up millions for costly Prime memberships without proper consent and created barriers for those wanting to cancel.
As part of the settlement, two executives, Neil Lindsay and Jamil Ghani, are required to avoid any illegal activities moving forward.
Moreover, Amazon will need to make it clearer on its website how customers can opt out of Prime signing, replacing phrasing like “no, I don’t want free shipping” with something more explicit.
The FTC noted that this settlement marks the second largest in its history.
Additionally, Amazon will have to simplify the cancellation process for existing customers and allow for third-party audits to confirm compliance with the settlement terms.
This case against Amazon is one of several high-profile actions currently pursued by the FTC, which is also focused on breaking up Meta, suing Ticketmaster over inflated concert prices, and investigating bot activity on its platform.
The $2.5 billion settlement stands as the second largest the FTC has ever achieved.
