Amazon in $2.5B settlement with FTC over Prime ‘deception’ allegations
Amazon has reached a multi-billion-dollar agreement with the Federal Trade Commission over accusations of misleading Prime membership practices.
In an official statement, the FTC said Amazon will be required to pay a $1 billion civil penalty, provide $1.5 billion in refunds back to consumers harmed by "deceptive" Prime enrollment practices and cease unlawful enrollment and cancellation practices for Prime.
The agreement settles a complaint the FTC first issued against Amazon in June 2023 (during the Biden administration) accusing the online giant of conducting a "years-long effort" to enroll consumers into its Prime program without their consent, while knowingly making it difficult for them to cancel Prime subscriptions.
[READ MORE: FTC sues Amazon for alleged Prime deception]
Specifically, the FTC alleged Amazon used deceptive user interface designs known as “dark patterns” to trick consumers into enrolling in automatically-renewing Prime subscriptions.
The FTC said Amazon also knowingly complicated the cancellation process for Prime subscribers who sought to end their membership. The primary purpose of its Prime cancellation process, according to the FTC compliant, was not to enable subscribers to cancel, but to stop them.
Amazon leadership slowed or rejected changes that would have made it easier for users to cancel Prime because those changes adversely affected Amazon’s bottom line, said the FTC.
"Today, the Trump-Vance FTC made history and secured a record-breaking, monumental win for the millions of Americans who are tired of deceptive subscriptions that feel impossible to cancel," FTC chairman Andrew N. Ferguson said in the statement. "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."
Amazon emailed Chain Store Age an official statement regarding the settlement.
"Amazon and our executives have always followed the law and this settlement allows us to move forward and focus on innovating for customers," Amazon spokesperson Mark Blafkin said in the emailed statement. "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. We will continue to do so, and look forward to what we’ll deliver for Prime members in the coming years."
In addition to monetary penalties and refunds, the settlement also requires Amazon to:
- Include a "clear and conspicuous" button for customers to decline Prime. Amazon can no longer have a button that says, "No, I don’t want Free Shipping."
- Include "clear and conspicuous" disclosures about all material terms of Prime during the Prime enrollment process, such as the cost, the date and frequency of charges to consumers, whether the subscription auto-renews, and cancellation procedures.
- Create an easy way for consumers to cancel Prime, using the same method that consumers used to sign up. The process cannot be difficult, costly, or time-consuming and must be available using the same method that consumers used to sign up; and,
- Payfor an independent, third-party supervisor to monitor Amazon’s compliance with the consumer redress distribution process.
The FTC reached the order with Amazon.com, Inc., as well as Amazon senior VP Neil Lindsay and VP Jamil Ghani. Amazon did not admit any wrongdoing in the settlement. The agreement was reached three days into a trial over the allegations in federal court in Seattle, CNBC reports.
As far back as 2019, the FTC placed Amazon under increased scrutiny for alleged antitrust issues. The FTC vote approving the stipulated final order was 3-0. The complaint was filed in the U.S. District Court for the Western District of Washington.
