Just days after a trial began, Amazon has settled a consumer lawsuit brought on by the Federal Trade Commission (FTC) in 2023.
The agency announced Thursday that it had secured a settlement with Amazon on a subscription-related lawsuit it brought against the e-tailer, alleging that the company deceptively influenced consumers to subscribe to Amazon Prime, then made it “exceedingly difficult to cancel.”
The $2.5 billion settlement earmarks $1.5 billion for consumer refunds. The FTC said that money will be disbursed to people “harmed by [Amazon’s] deceptive Prime enrollment practices.” The remaining $1 billion is a civil penalty Amazon will pay directly to the agency.
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According to a LinkedIn post from Zak Stambor, an analyst for eMarketer, the $2.5 billion represents a single-digit portion of Amazon’s at-large Prime subscription revenue.
“This won’t dent Amazon’s dominance. Prime raked in $44.37 billion in subscription revenue last year, so the $2.5 billion settlement amounts to just 5.6 percent of that total. With more than 200 million global members—including roughly three-quarters of U.S. households—Prime remains the backbone of Amazon’s flywheel,” Stambor wrote.
Still, regulators remained optimistic about the size of the settlement. The FTC said the civil penalty accounts for the largest-ever fine delivered to company over a civil violation.
Andrew Ferguson, chairman of the FTC, called the settlement a “monumental win for the millions of Americans who are tired of deceptive subscriptions that feel impossible to cancel.” The agency estimates that about 35 million Americans were impacted by Amazon’s alleged actions.
“The evidence showed that Amazon used sophisticated subscription traps designed to manipulate consumers into enrolling in Prime, and then made it exceedingly hard for consumers to end their subscription,” Ferguson said in a statement. “Today, we are putting billions of dollars back into Americans’ pockets, and making sure Amazon never does this again. The Trump-Vance FTC is committed to fighting back when companies try to cheat ordinary Americans out of their hard-earned pay.”
In addition to the financial penalties the company will pay the FTC and consumers, it will be required to make changes to the marketing behind the Prime model.
As part of the settlement, the FTC has mandated that Amazon remove a button that reads, “No, I don’t want Free Shipping,” thereby creating what it calls “a clear and conspicuous” way for consumers to decline a Prime membership.
The e-tail and technology giant will also be required to disclose “all material terms of Prime” while a consumer is actively enrolling in the service; that kind of information includes the cost, the frequency of the billing and more. What’s more, the company will be required to make it easier for consumers to cancel their subscription.
Amazon said it has already made these changes and plans to maintain them in line with the terms of the agreement. Despite the settlement, the company did not admit guilt on the FTC’s allegations.
Amazon spokesperson Mark Blafkin told Sourcing Journal via email that the company and its executives have “always followed the law.” Blafkin further noted that the company sees the agreed-upon settlement as a vehicle by which to “move forward and focus on innovating for customers.
“We work incredibly hard to make it clear and simple for customers to both sign up or cancel their Prime membership and to offer substantial value for our many millions of loyal Prime members around the world,” Blafkin said in a statement.
