Amazon agrees to pay FTC billions to settle Prime claims

SEATTLE (CN) — On Thursday, Amazon agreed to pay the Federal Trade Commission $2.5 billion after the FTC accused the e-commerce giant of tricking consumers into signing up for Prime.

Under the settlement, Amazon agreed to pay the FTC $1.5 billion as monetary relief and $1 billion as a civil penalty. The company has two weeks to pay $500 million to the FTC and 18 months to pay the remaining $500 million.

The agreement came less than a week after the trial began, with the FTC beginning opening arguments by claiming that Amazon would entice consumers into buying their products but then force them to go on a detour that would lead them to the Prime enrollment page. Even if a consumer didn’t agree to use Prime, the FTC said that Amazon would use their previously provided billing information to sign them up for the service anyway.

“Amazon knowingly intended to trick consumers into Prime subscriptions without their consent and trapped their consumers by making it difficult to cancel,” said FTC attorney Jonathan Cohen at Tuesday’s hearing. “The obsession was with the number of customers, not about treating them right.”

The settlement requires Amazon and its officers to give consumers a simple way to cancel their Prime subscriptions, avoid charging an increased amount for a good or service and immediately stop any recurring charges. The court also ordered Amazon and its officers to remove a negative option feature for Prime, which includes preventing them from adding an option saying, “No thanks, I don’t want free shipping.”

An Amazon spokesperson said the company had already implemented the changes before agreeing to the settlement.

“This settlement allows us to move forward and focus on innovating for customers,” said Amazon spokesperson Mark Blafkin. “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.”

Per the settlement, Amazon must post links to the settlement website on its landing pages or a similar page on its mobile app, and the company needs to keep the link up for the first 30 days of the settlement program. For customers who enrolled in a Prime subscription and used no more than three Prime benefits in a year, the settlement could pay them up to $51.

Last week, U.S. District Judge John Chun determined that Amazon broke consumer protection law by revealing Prime’s terms only after it gathered customers’ payment information. The Joe Biden appointee granted the FTC a partial victory after it sued Amazon in June 2023, claiming that the company manipulated consumers into subscribing without all available information.

“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,” said FTC Chairman Andrew N. Ferguson. “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. The Trump-Vance FTC is committed to fighting back when companies try to cheat ordinary Americans out of their hard-earned pay.”

Even after agreeing to turn over billions to the FTC, Amazon maintained that its executives “always” followed the law.

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