In a significant development, Amazon has agreed to pay a staggering sum of up to $2.5 billion to resolve allegations that it misled countless individuals into subscribing to its Prime membership service, and then intentionally complicated the cancellation process for those trying to leave.
This considerable settlement, announced on Thursday, emerged just days into a jury trial in Seattle. The legal battle originated from a 2023 lawsuit filed by the Federal Trade Commission (F.T.C.) concerning these very practices.
This lawsuit struck at the core of Amazon’s public image as a consumer advocate, impacting hundreds of millions who rely on its online marketplace. While not as broad as the F.T.C.’s larger antitrust case against Amazon, this particular suit focused on the company’s management of its highly popular Prime subscription service – a program deeply integrated into its business model and the daily lives of countless users.
With an estimated 200 million U.S. subscribers, Prime is a powerhouse for Amazon, generating over $44 billion last year. However, its true value extends beyond mere subscription fees. Prime members are Amazon’s most loyal and frequent shoppers. Interestingly, this settlement isn’t expected to alter Amazon’s fundamental relationship with these crucial customers.
According to Josh Lowitz, a partner at Consumer Intelligence Research Partners, a firm with over a decade of experience surveying Prime users, “Nobody likes a trial.” He noted Prime’s immense popularity but suggested Amazon likely viewed the $2.5 billion settlement as a strategic move to conclude the legal saga before the critical Christmas shopping season.
This resolution highlights the F.T.C.’s persistent efforts, under its Republican leadership, to challenge major tech corporations. This resolve remains strong despite previous attempts by tech executives to foster relationships with President Trump, who this year dismissed the two Democratic commissioners, solidifying Republican control of the agency.
It’s worth noting that in 2023, then-Democratic F.T.C. Chair Lina Khan initiated a separate antitrust lawsuit against Amazon. That case alleges that Amazon unfairly pressured third-party sellers on its platform and prioritized its own services, ultimately increasing consumer costs. Amazon continues to deny these allegations, and that lawsuit remains ongoing.
For the Prime membership case, Amazon has committed to paying $1 billion in direct penalties, alongside an additional $1 billion to $1.5 billion in restitution for affected customers. Those who qualify could receive $51 each. The F.T.C. has underscored this as one of its most substantial settlements ever.
Notably, Amazon settled the case without admitting or denying any wrongdoing.
Mark Blafkin, an Amazon spokesman, issued a statement asserting, “Amazon and our executives have always followed the law, and this settlement enables us to concentrate on future innovation for our customers.”
He further emphasized Amazon’s commitment to transparent and straightforward Prime sign-up and cancellation processes, adding, “we look forward to what we’ll deliver for Prime members in the coming years.”
F.T.C. Chairman Andrew Ferguson, a prominent critic of tech behemoths, has consistently accused them of suppressing free speech and stifling competition. He has maintained the pursuit of antitrust lawsuits against Amazon and Meta, initially launched by previous F.T.C. chairs from both parties. Additionally, his tenure has seen new investigations into AI companies regarding child safety with chatbots and major tech investments in AI startups.
Former F.T.C. Chair Bill Kovacic observed that Chairman Ferguson’s actions are largely driven by concerns over the significant influence that Amazon, Meta, Google, and other major tech platforms wield, particularly concerning speech. According to Kovacic, Ferguson is leveraging consumer protection and antitrust laws to curb this power, and the agency is anticipated to continue its aggressive stance against these technology giants.
Kovacic stated, “I regard this as a significant outcome, and I think it means that the commission is serious in its commitment to challenge serious fraud, especially the fraudulent conduct of the big tech companies.”
An F.T.C. official, speaking anonymously to reporters, affirmed, “This is consistent with Chairman Ferguson’s agenda for the agency, where he is focused on the U.S. consumer first and foremost and making them whole.”
The F.T.C.’s case largely revolved around the concept of “dark patterns” – deceptive website designs that intentionally guide users into unwanted subscriptions or create overly complex cancellation procedures.
As evidence, the commission cited instances where customers attempting to purchase an item were presented with a prominent orange button advertising “Get FREE Same-Day Delivery,” which, when clicked, automatically enrolled them in Prime. The only alternative to bypass this enrollment and complete their purchase was a small, less noticeable text link stating: “No thanks, I do not want FREE delivery.”
Amazon had defended its practices as industry standard. However, the settlement explicitly prohibits such misleading language in the future, although Amazon states it will retain its current sign-up and cancellation procedures, which it claims have been in place for several years.
Discussions between Amazon and the F.T.C. regarding a settlement had been ongoing for some time. These talks reportedly continued even as the trial commenced, with a former Amazon employee testifying on Tuesday that the company was aware of instances where customers unintentionally subscribed to Prime, according to sources close to the negotiations who requested anonymity.
The terms of this settlement will remain in effect for a decade. Additionally, two key executives responsible for Prime, Neil Lindsay and Jamil Ghani, have individually committed to adhering to these new requirements for three years.
As part of the agreement, Amazon is mandated to disburse $51 to qualifying customers within 90 days. Eligibility requires individuals to have signed up via the challenged process between June 23, 2019, and June 23, 2025, and to have subsequently made minimal use of Prime benefits, such as video streaming.
Furthermore, Amazon will inform other customers of their right to submit a claim if they believe they were unknowingly enrolled or deterred from canceling by persuasive offers during the cancellation flow. The total payout to customers is projected to be between $1 billion and $1.5 billion, contingent on the number of valid claims received.
However, some tech policy experts argue that this action may not be sufficient to prevent similar deceptive practices in the future.
Nidhi Hegde, Executive Director of the American Economic Liberties Project, a left-leaning advocacy group, strongly criticized the outcome, stating, “Ordinary people would go to jail for this kind of fraud, but Amazon and its corporate executives can write a meager check to skip their day in court while keeping their jobs and reputations intact.”
Following the official filing of the settlement with the court, Judge John H. Chun dismissed the nine jurors, bringing the trial to an immediate close.