Amazon has signed a historic $2.5 billion settlement with the Federal Trade Commission (FTC) after it was accused by the agency of deceiving consumers into signing up for its Prime program and making unwarranted obstacles for those attempting to cancel.
The firm will pay a civil penalty of $1 billion under the agreement—the largest the agency has ever levied on a rule-breaker—as $1.5 billion will be refunded to customers who signed up for Prime by mistake or were dissuaded from dropping it, the company said on Thursday.
The surprise settlement was decided just days into hearings in the U.S. District Court in Seattle. At the heart of the case was the Restore Online Shoppers' Confidence Act of 2010, a legislation mandating online billing transparency.
FTC officials stressed the scope of the refund was greater than anticipated.
"I believe it took them just a matter of days to realize they were going to lose. And they approached us and they settled," said Chris Mufarrige, director of the Bureau of Consumer Protection.
Amazon, meanwhile, stood firm in its legal position but explained it preferred to settle the case soon instead of going through extended litigation. Amazon did not admit to any wrongdoing in the two-year-old case.
"Amazon and our leadership have always complied with the law and this settlement enables us to move on and continue to invest in innovating for customers," spokesman Mark Blafkin stated. "We work extremely hard to make it easy and straightforward for customers to both sign up or cancel their Prime membership, and provide significant value for our many millions of loyal Prime members globally."
As part of the settlement, Prime subscribers who signed up between June 23, 2019, and June 23, 2025, via certain links like "Single Page Checkout" might receive automatic refunds of up to $51 within 90 days of the court order. Amazon is also required to establish a claims system for over 30 million affected customers based on the issues raised in the FTC case.
Prime, a staple of Amazon's business, provides perks like free shipping, streaming access, and Whole Foods price reductions. Membership is $139 per year or $14.99 per month. The company's service has more than 200 million subscribers globally and accounted for over $12 billion in subscription revenue during the company's most recent earnings report—a 12% year-over-year increase.
Under the FTC, Amazon frequently pushed customers into Prime by crafting purchase flows that hid the fact that they were also enrolling in a subscription. The agency also claimed that it was too hard to cancel, with company executives fighting design changes that would have made cancellation easier.
Internally, Amazon allegedly called its multi-page cancellation process "Iliad" after the long Trojan War siege in Greek myth. Clients had to confirm cancellation on three separate pages.
The FTC started investigating Amazon's Prime signup practices in 2021 and filed the case formally in 2023, under Chair Lina Khan, who has been aggressive on antitrust cases concerning the large technology companies. The lawsuit preceded the agency's larger antitrust case accusing Amazon of monopolization in online commerce by several months.
While Meta (then Facebook) was slapped with a record $5 billion penalty in 2019 for privacy abuses, this case is the biggest FTC penalty for violating an industry-wide rule.
The settlement forces Amazon to clearly explain subscription terms, obtain express customer consent, and offer clear choices to accept or decline Prime offers. It must also make automatic renewals transparent, and cancellations can't be "difficult, costly, confusing or time consuming," as the FTC order mandates.
The firm said the agreement does not commit it to any new changes but to uphold the sign-up and cancellation enhancements it has made over the last few years.
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