Amazon Agrees to Historic $2.5 Billion Settlement with the FTC Over Prime Membership Practices
Amazon has reached a historic $2.5 billion (approximately £1.8 billion) settlement with the Federal Trade Commission (FTC), which accused the online retail giant of tricking customers into signing up for its Prime memberships and making it difficult for them to cancel.
Under the settlement, the Seattle-based company will pay $1 billion (£749 million) in civil penalties—the largest FTC fine in its history. An additional $1.5 billion (£1.1 billion) will be distributed to consumers who were unintentionally enrolled in Prime or were deterred from cancelling their subscriptions, according to the agency.
Background of the Case
The FTC sued Amazon in the U.S. District Court in Seattle two years ago, alleging more than a decade of legal violations. This included breaches of the Restore Online Shoppers Confidence Act, a 2010 law designed to ensure online shoppers are fully aware of the charges they incur. Amazon did not admit any wrongdoing as part of the settlement.
About Amazon Prime
Amazon Prime offers subscribers various perks, including faster shipping, video streaming, and discounts at Whole Foods. The service costs $139 (£104) annually or $14.99 (£11.23) per month. Prime is a key and growing part of Amazon’s business, boasting more than 200 million members.
In its latest quarterly report released in July, Amazon reported over $12 billion (£9 billion) in net revenue from subscription services—a 12% increase compared to the same period last year. This revenue includes fees from Prime memberships as well as other subscription services such as Amazon Music and Kindle e-books.
Amazon’s Response
Amazon has stated that it clearly explains Prime’s terms before charging customers and offers straightforward methods to cancel memberships, including by phone, online, and via online chat. In a trial brief filed last month, the company acknowledged that “occasional customer frustrations and mistakes are inevitable, especially for a program as popular as Amazon Prime.”
FTC Allegations
However, the FTC contended that Amazon deliberately made it difficult for customers to purchase items without also subscribing to Prime. In some cases, customers were shown a button to complete their transaction that did not clearly indicate it would also enroll them in Prime.
The FTC further alleged that cancelling a subscription was often too complicated. Amazon’s leadership reportedly slowed or rejected proposed changes that would have made the cancellation process easier. Internally, Amazon referred to the lengthy cancellation procedure as “Iliad,” referencing the ancient Greek poem about the prolonged siege of Troy during the Trojan War. To cancel, customers had to affirm their desire to cancel membership on three separate pages.
Regulatory Context
The FTC began investigating Amazon’s Prime subscription practices in 2021 during the Trump administration. The lawsuit, however, was filed in 2023 under former FTC Chairwoman Lina Khan, an antitrust expert appointed by President Joe Biden. The case was filed just months before the agency also submitted an antitrust lawsuit against Amazon, accusing the company of monopolistic control over online markets.
This settlement marks a significant moment in the FTC’s ongoing efforts to regulate large technology companies and protect consumers in the digital marketplace.
https://www.breakingnews.ie/world/amazon-reaches-1-8bn-settlement-with-federal-trade-commission-in-prime-case-1811090.html