AT A GLANCE
- Amazon will pay $2.5 billion to settle FTC allegations over deceptive Prime sign-ups.
- The settlement includes $1 billion in penalties and $1.5 billion in consumer refunds.
- FTC accused Amazon of using “subscription traps” and making cancellations deliberately difficult.
- Amazon executives’ internal comments revealed knowledge of the deceptive practices.
Amazon Reaches Historic Settlement with FTC Over Prime Practices
Amazon has agreed to a $2.5 billion settlement with the Federal Trade Commission (FTC) after just three days in federal court, resolving allegations that the company misled millions of customers into enrolling in its Prime membership program and deliberately made cancellation difficult.
The lawsuit, first filed in June 2023, accused Amazon of violating federal law through deceptive enrollment tactics and obstructive cancellation processes. While Amazon continues to deny wrongdoing, the settlement is one of the largest in FTC history.
Breakdown of the $2.5 Billion Settlement
The deal requires Amazon to pay a $1 billion civil penalty—the largest ever tied to an FTC rule violation—and provide $1.5 billion in refunds to roughly 35 million consumers who were enrolled in Prime without full consent or faced barriers when trying to cancel.
This marks only the third case under the Restore Online Shoppers’ Confidence Act (ROSCA) where the FTC has secured civil penalties. It also includes the second-largest consumer restitution award ever won by the agency.
FTC: “Subscription Traps” Were Deliberate
FTC Chairman Andrew N. Ferguson praised the outcome as a victory for everyday Americans.
“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. “Today, we are putting billions of dollars back into Americans’ pockets, and making sure Amazon never does this again.”
Internal company records showed Amazon executives openly acknowledged the tactics, referring to the subscription model as “an unspoken cancer” and admitting that “subscription driving is a bit of a shady world.”
Required Changes to Prime Sign-Up and Cancellation
Beyond financial penalties, the settlement orders Amazon to overhaul its Prime enrollment and cancellation systems. Key requirements include:
- A clear “Decline Prime” button, replacing misleading options like “No, I don’t want Free Shipping.”
- Transparent disclosure of all material terms, including cost, auto-renewal, billing frequency, and cancellation methods.
- An easy cancellation process available through the same method used to sign up.
- Oversight by an independent, third-party monitor to ensure compliance and fair refund distribution.
The final order was approved unanimously by the Commission in a 3-0 vote and filed in the U.S. District Court for the Western District of Washington.
