Amazon has agreed to pay a staggering sum of up to $2.5 billion to settle accusations that it tricked tens of millions of users into subscribing to its Prime membership program. Furthermore, the lawsuit claimed that Amazon deliberately complicated the cancellation process for these customers.
This significant settlement, announced on Thursday, comes just days after a jury trial commenced in Seattle. The case originated from a lawsuit filed by the Federal Trade Commission (FTC) in 2023.
At its core, the lawsuit challenged Amazon’s self-proclaimed image as a consumer champion, a claim it makes to the hundreds of millions of customers who rely on its online shopping services. While not as extensive as a separate antitrust case the FTC brought against Amazon, this specific suit zeroed in on how the company manages a wildly popular subscription program that is vital to its operations and deeply integrated into many customers’ lives.
Approximately 200 million individuals in the United States utilize Prime for their Amazon purchases. Last year, subscriptions—primarily Prime—generated over $44 billion. However, Prime’s value extends far beyond these monthly fees. Prime members are Amazon’s most valuable customers, consistently buying more items and shopping more frequently than non-subscribers. Despite the substantial settlement, it is not expected to fundamentally alter Amazon’s interaction with its Prime customer base.
“Nobody enjoys going to trial,” remarked Josh Lowitz, a partner at Consumer Intelligence Research Partners, a firm that has tracked Prime customer behavior for over a decade. He noted Prime’s immense popularity, but also suggested that Amazon likely concluded that a $2.5 billion payment, settling the issue before the busy Christmas season, was a strategic move.
This settlement underscores the Republican-led FTC’s ongoing efforts to challenge major tech companies, even in the face of their executives’ numerous attempts to curry favor with political figures. This year, two Democratic commissioners were dismissed, leaving three Republican members at the helm of the agency.
In 2023, then-FTC Democratic chair Lina Khan initiated a lawsuit against Amazon, alleging that it unfairly pressured third-party sellers on its platform and prioritized its own services, ultimately driving up costs for consumers. This antitrust case remains active, with Amazon denying all allegations.
In the Prime case, Amazon agreed to pay $1 billion in penalties, alongside an additional $1 billion to $1.5 billion in customer refunds. Eligible customers could receive $51 each. The agency highlighted this as one of the largest settlements in its history.
Amazon settled the case without admitting or denying any wrongdoing.
Mark Blafkin, a company spokesman, stated, “Amazon and our executives have always operated within the bounds of the law, and this settlement allows us to move forward and concentrate on innovating for our customers.”
He further added that Amazon has always strived to make the process of signing up for or canceling a Prime membership straightforward and transparent, and that the company looks forward to enhancing the Prime experience in the years to come.
Andrew Ferguson, the chairman of the FTC, has consistently been a vocal critic of major tech corporations, accusing them of suppressing free speech and leveraging their market dominance to stifle competition. He has actively utilized consumer protection and antitrust laws to curb the influence of these platforms. Ferguson has continued to pursue antitrust lawsuits against Amazon and Meta, initiated by his predecessors from both Republican and Democratic parties. He has also launched investigations into artificial intelligence firms concerning children’s use of chatbots and large tech companies’ investments in AI startups.
Bill Kovacic, a former chair of the agency, noted that Mr. Ferguson is particularly driven by the significant control Amazon, Meta, Google, and other tech platforms exert over public discourse. Kovacic explained that Ferguson employs regulatory tools to enforce consumer protection and antitrust statutes, thereby curbing the power of these platforms. Kovacic anticipates that the agency will persist in its assertive approach against technology giants.
“We secured more than we initially sought from the judge—$1.5 billion to be returned to consumers—along with a billion dollars in civil penalties to ensure Amazon understands that such conduct will not be tolerated again,” Ferguson stated in a Fox Business Network interview.
The FTC’s case primarily revolved around the concept of “dark patterns”—website designs that intentionally guide customers toward unwanted subscriptions or make the cancellation process overly complex.
For instance, the commission documented that when a customer attempted to purchase an item, Amazon would present a page featuring a prominent orange button that declared “Get FREE Same-Day Delivery,” which would inadvertently enroll the customer in Prime. To proceed with the purchase without enrolling in Prime, the only option was to click a small text link that stated: “No thanks, I do not want FREE delivery.”
Amazon countered that its practices were standard across the industry. However, under the terms of the settlement, such deceptive language will be explicitly forbidden. Despite this, Amazon confirmed it would be allowed to maintain the sign-up and cancellation procedures that have been in place for several years.
The company and the FTC had been engaged in settlement discussions for some time. These conversations persisted even as the trial began on Tuesday, with a former Amazon employee testifying that the company was aware some individuals were unknowingly enrolling in Prime, according to two sources familiar with the confidential talks.
The agreement dictates that the settlement with Amazon will last for 10 years. Neil Lindsay and Jamil Ghani, two executives who have overseen the Prime program, have personally committed to adhering to the settlement’s terms for three years.
As per the agreement, Amazon will issue $51 refunds within 90 days to customers who were enrolled through the sign-up process that the FTC challenged. To qualify for this refund, customers must meet specific criteria, such as having signed up between June 23, 2019, and June 23, 2025, and having made minimal use of Prime benefits like video streaming after their enrollment.
Additionally, Amazon will inform other customers that they can file a claim if they believe they were unintentionally enrolled in the program or were discouraged from canceling by enticing offers during the cancellation process. The company’s total payout to customers will range from $1 billion to $1.5 billion, depending on the volume of claims received.
However, some tech policy experts argue that this action is not sufficiently strong to prevent similar misconduct in the future.
“While ordinary individuals would face imprisonment for this type of fraud, Amazon and its corporate leaders merely write a modest check to avoid a court judgment, all while preserving their positions and reputations,” commented Nidhi Hegde, executive director of the American Economic Liberties Project, a left-leaning advocacy group.
Following the submission of the settlement to the court, Judge John H. Chun dismissed the nine jurors, bringing an end to the trial.