In a significant legal development, Amazon has agreed to a $2.5 billion settlement stemming from allegations that it intentionally misled tens of millions of users into subscribing to its Prime membership service, and subsequently created complex obstacles for those attempting to cancel.
This landmark agreement, announced on Thursday, comes just days after a jury trial commenced in Seattle. The case originated from a 2023 lawsuit filed by the Federal Trade Commission (FTC), which challenged the very foundation of Amazon’s self-proclaimed role as a consumer champion for its vast online shopping user base.
The settlement package includes a hefty $1 billion in penalties and an additional $1.5 billion earmarked for customer payouts. Qualifying customers could receive up to $51 each, in what the FTC describes as one of the largest settlements in its history.
While agreeing to the settlement, Amazon chose not to admit or deny any wrongdoing. The company did not immediately provide a statement in response to inquiries regarding the agreement.
With an estimated 200 million Prime members in the United States, the program is a cornerstone of Amazon’s business. Last year alone, subscriptions, predominantly Prime, generated over $44 billion. However, Prime’s true value extends far beyond its monthly fees; these members are Amazon’s most loyal and active customers, making more frequent and larger purchases than non-subscribers.
Andrew Ferguson, the chairman of the FTC, has been a prominent critic of major technology companies, frequently accusing them of stifling innovation and leveraging their market power to quash competition. Under his leadership, the agency has pursued antitrust actions against giants like Amazon and Meta, alongside probing artificial intelligence firms over concerns related to child safety with chatbots and the significant investments by tech behemoths in AI startups.
“This aligns perfectly with Chairman Ferguson’s vision for the agency, prioritizing U.S. consumers and ensuring they are made whole,” an FTC official stated during a press briefing.
As part of the settlement, Amazon is obligated to distribute $51 within 90 days to customers identified as having been subjected to the FTC’s scrutinized sign-up process. Eligibility criteria for these payouts include factors such as minimal usage of Prime benefits, like video streaming, after their enrollment.
Furthermore, Amazon will be required to inform other customers that they can file a claim if they believe their enrollment in the program was accidental or if they were discouraged from canceling by persuasive offers during the cancellation process.
This is a developing story. Please check back for further updates.