Amazon has agreed to a staggering $2.5 billion settlement to resolve allegations that it deceptively enrolled millions of customers into its Prime membership program and then deliberately made the cancellation process overly complicated.
This significant settlement, revealed on Thursday, came just days after a jury trial commenced in Seattle. The core of the issue originated from a 2023 lawsuit filed by the Federal Trade Commission, challenging Amazon’s self-proclaimed role as a consumer advocate, especially considering the hundreds of millions who rely on its online services.
The agreement mandates $1 billion in penalties, alongside $1.5 billion earmarked for customer reimbursements. Eligible customers could receive $51 each, marking this as one of the largest settlements in the FTC’s operational history.
Despite the settlement, Amazon maintained its stance of neither admitting nor denying the accusations. The company offered no immediate comment when approached.
In the United States, an estimated 200 million individuals subscribe to Amazon Prime for their shopping needs. Last year, subscriptions, predominantly Prime, generated over $44 billion. However, Prime’s significance to Amazon extends far beyond these membership fees; Prime members are their most valuable customers, purchasing more items and with greater frequency than non-subscribers.
Andrew Ferguson, the FTC chairman, has consistently voiced criticism against major tech companies, accusing them of suppressing free expression and leveraging their market dominance to stifle competition. Under his leadership, the agency has pursued antitrust lawsuits against giants like Amazon and Meta, and has initiated probes into AI firms regarding potential risks to children from chatbots, alongside examining tech industry investments in AI startups.
An FTC official, speaking to reporters, stated, ‘This aligns perfectly with Chairman Ferguson’s vision for the agency, prioritizing the U.S. consumer and ensuring they receive proper compensation.’
As part of the settlement, Amazon is required to distribute $51 to qualifying customers within 90 days. Eligibility criteria include individuals who were subjected to the FTC’s scrutinized sign-up process and subsequently made minimal use of Prime benefits, such as video streaming, post-enrollment.
Furthermore, Amazon will inform other customers of their right to submit a claim if they believe they were unknowingly enrolled in Prime or were dissuaded from canceling through enticing offers during the unsubscribe process.