The Federal Trade Commission (FTC) has reached a $2.5 billion settlement with Amazon over its "deceptive" Prime subscription tactics.

Of the total penalty, $1.5 billion will go toward customer refunds for the the "millions" of people who were either enrolled in Prime without their consent, or that were unable to cancel their subscriptions, the FTC says.

The FTC first filed the complaint against Amazon in 2023, and as of two days ago it set to go to trial, where a jury would decide if the company tricked its customers, NPR reports. But now, there will not be a trial since the two parties have settled.

"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," says FTC Chairman Andrew N. Ferguson.

That evidence includes documents showing that Amazon executives "discussed these unlawful enrollment and cancellation issues, with comments like 'subscription driving is a bit of a shady world' and leading consumers to unwanted subscriptions is 'an unspoken cancer.'"

Two Amazon executives were charged for their role in the scheme, senior vice president Neil Lindsay and vice president Jamil Ghani.

"Amazon and our executives have always followed the law and this settlement allows us to move forward and focus on innovating for customers," says Mark Blafkin, Amazon spokesperson. "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."

The settlement requires Amazon to "make meaningful changes" to how people enroll in Prime and cancel their subscriptions. That includes introducing "a clear and conspicuous button" for customers to decline Prime. This would replace the less-direct button that reads, "No, I don’t want Free Shipping." (Who doesn't want that?)

Amazon also needs to be more upfront about the terms of Prime during the enrollment process, such as the cost, date, and frequency of charges, as well as whether the subscription auto-renews, and how customers can cancel. Speaking of cancellations, Amazon must create "an easy way" to do it that is not costly or time-consuming. It has to be available using the same method where consumers signed up for Prime.

Finally, Amazon has to pay for an independent, third-party supervisor to monitor its compliance with these changes. However, our sources tell us Amazon has already made many of these changes, and the real result of the settlement is that they will maintain them.

The FTC has another open case against Amazon, backed by 18 states and Puerto Rico. They allege the tech company "is a monopolist that uses a set of interlocking anticompetitive and unfair strategies to illegally maintain its monopoly power." The case is pending with no update since 2024.

By: DocMemory
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