Amazon to Pay $2.5B in FTC Prime Lawsuit Settlement
▼ Summary
– Amazon will pay $2.5 billion to settle an FTC lawsuit alleging it tricked customers into Prime subscriptions and made cancellation difficult.
– The settlement includes a $1 billion civil penalty and $1.5 billion in customer refunds for an estimated 35 million affected people.
– The FTC accused Amazon of using “dark patterns” in a deceptive sign-up process that company executives were aware of.
– Amazon must now simplify its Prime cancellation process and provide a clear button to decline a subscription during sign-up.
– This settlement resolves one FTC case, while a separate antitrust lawsuit against Amazon is still pending for trial in 2027.
Amazon has reached a significant settlement with the Federal Trade Commission, agreeing to pay $2.5 billion to resolve allegations that it misled consumers into enrolling for Prime memberships and deliberately complicated the cancellation process. This resolution includes a $1 billion civil penalty and approximately $1.5 billion in customer refunds intended for an estimated 35 million people affected by the company’s sign-up tactics.
Originally, a jury trial was scheduled to begin this week in Seattle, but the proceedings were halted by this agreement. The FTC initially filed the lawsuit in 2023, accusing Amazon of employing manipulative design techniques, often called “dark patterns,” to trick users into subscribing to Prime. The complaint further stated that company leadership knew about these practices and that the cancellation procedure was intentionally burdensome, forcing customers to navigate numerous unnecessary steps.
As part of the settlement, Amazon is now legally required to overhaul its Prime enrollment system. The company must implement a straightforward and obvious button for customers to decline a Prime subscription. This change prohibits Amazon from using confusing language, such as a button labeled “No, I don’t want Free Shipping,” to discourage users from opting out.
Furthermore, the e-commerce giant must simplify the cancellation process, ensuring it is no more difficult than signing up. The FTC mandates that ending a membership cannot be a complex, expensive, or time-consuming ordeal. Amazon is also obligated to provide clear, upfront information about Prime’s terms, detailing its cost, automatic renewal policy, and how to cancel.
This settlement closes one major legal challenge for Amazon, though the company still faces a separate antitrust lawsuit from the FTC. That case alleges Amazon penalized merchants who offered lower prices on other platforms, with a trial expected in 2027.
FTC Chairman Andrew Ferguson commented on the outcome, stating that evidence revealed Amazon utilized sophisticated subscription traps to enroll consumers in Prime and then created significant obstacles to prevent them from leaving.
(Source: The Verge)
