Amazon to pay $2.5bn in FTC settlement deal over Prime membership claims

Amazon has agreed to pay $2.5bn (£1.72bn) to settle allegations that it enrolled millions of consumers into Prime subscriptions without their consent and made it unnecessarily difficult to cancel.

The settlement with the Federal Trade Commission (FTC) includes a $1bn (750m) civil penalty and $1.5bn (£1.712bn) in refunds to affected consumers. Amazon has also agreed to change its Prime sign-up and cancellation processes.

The FTC alleged that Amazon used “deceptive user interfaces” to push consumers into Prime and created a complex cancellation process designed to deter people from ending their membership. 

Internal documents cited by the agency showed Amazon executives discussed these practices, with one employee reportedly describing unwanted subscriptions as “an unspoken cancer.”

As part of the order, Amazon must provide clear and prominent disclosures on Prime costs, auto-renewal terms and cancellation procedures during sign-up. 

It is also required to add a straightforward option for consumers to decline Prime membership. The retailer must also allow cancellations via the same method used to enrol, ensuring the process is not time-consuming or costly. 

In addition, Amazon will fund an independent third-party monitor to oversee compliance with consumer refunds.

The settlement marks only the third case under the Restore Online Shoppers’ Confidence Act (ROSCA) in which the FTC has obtained a civil penalty. It was approved unanimously by the Commission and filed in the U.S. District Court for the Western District of Washington.

Andrew N. Ferguson, FTC chair, said: “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. Today, we are putting billions of dollars back into Americans’ pockets, and making sure Amazon never does this again.”

Amazon spokesperson said in a statement: “Amazon and our executives have always followed the law and this settlement allows us 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. We will continue to do so, and look forward to what we’ll deliver for Prime members in the coming years.”