A trial over whether Amazon had tricked almost 40 million customers into signing up for its Prime service had just gotten underway
Daria Nipot
Three days after its trial got underway, Amazon $AMZN has agreed to pay $2.5 billion to settle allegations by the Federal Trade Commission that it tricked nearly 40 million customers into signing up for Prime and made cancelling that subscription especially challenging.
Opening arguments in the trial started on Tuesday and Amazon, in a statement the day before the trial began, insisted "neither Amazon nor the individual defendants did anything wrong – we remain confident that the facts will show these executives acted properly and we always put customers first."
Under the terms of the settlement, Amazon will be required to pay a $1 billion civil penalty and provide $1.5 billion in refunds back to consumers, the FTC said in a media release. The $1.5 billion in refunds is the second-largest restitution amount ever obtained by the FTC, the organization said.
Amazon, in a statement, told Quartz, "Amazon and our executives have always followed the law and this settlement allows us to move forward and focus on innovating for customers."
The FTC called the settlement "a record-breaking, monumental win for the millions of Americans who are tired of deceptive subscriptions that feel impossible to cancel."
The lawsuit against Amazon was originally filed two years ago. The FTC alleged Amazon had created a “labyrinthine” cancellation process, which was designed to deter customers from finishing the act of cancelation. Customers wishing to cancel their Prime subscription, it said, were required to “navigate a four-page, six-click, fifteen-option cancellation process.” Warnings on missing deals and discounts were also included to discourage customers.
Amazon has changed its cancellation policies since the fight with the FTC began. A standalone cancellation page lets members see the options available to them on pausing or ending their membership.
Under the terms of the deal, Amazon will provide a clear and conspicuous button for customers to decline Prime. The company can no longer have a button that says, “No, I don’t want Free Shipping.” It also will have to pay for an independent, third-party supervisor to monitor its compliance with the settlement.
Amazon does not regularly report Prime subscriber numbers, but they're currently estimated at north of 200 million. Prime customers also tend to buy more than non-subscribers, making them more valuable to the company.
This suit was separate from the FTC's antitrust case against Amazon, which was brought with the assistance of several state attorneys general. That case remains on track to go to trial in 2027.
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