Amazon has reached a historic $2.5 billion settlement with the Federal Trade Commission (FTC). This has made it difficult for the online retail giant to sign up for its primary membership and then cancel it.
The Seattle company pays a $1 billion civil penalty – the largest fine in agency history is a violation of the rules, with $1.5 billion being repaid to consumers who have been unintentionally registered with Prime or have been prevented from canceling their subscription.
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The surprising settlement comes days after the trial began this week in Seattle’s U.S. District Court. At the heart of the case is the online confidence restoration law, a 2010 law designed to ensure people know what is being charged online.
FTC officials said Amazon has returned to the wall and that consumer rebates exceeded the expectations of agency experts.
“I think it took me a few days to see that they were about to lose, and they came to us and they paid,” said Chris Mufarige, director of the Consumer Protection Agency, in the settlement negotiations.
However, Amazon said it is confident it will win the case, but it chose to resolve it quickly rather than going through potentially years of trials and appeals. The company refused to admit fraud in the case first filed two years ago.
“Amazon and our executives have always followed the law, and this settlement allows us to move forward and focus on innovation for our customers,” spokesman Mark Brafkin said in a statement. “We are working very hard to make it clear and simple that our customers sign up or cancel key memberships and provide significant value to millions of loyal key members around the world.”
It’s a consumer and FTC victory, but the settlement is relatively painless for Amazon. The company receives approximately $2.5 billion in sales every 33 hours. Amazon’s stocks remained little different after the news.
Certain Prime customers eligible for automatic refunds of up to $51 include customers who may have signed up for membership via the company’s “Single Page Checkout” from June 23, 2019 to June 23, 2025.
Amazon is also on the hook to set up a billing process for over 30 million customers who may have been affected by other issues at the heart of their FTC cases, including the cancellation process.
“I don’t want free shipping”
Amazon Prime offers subscribers with perks including faster shipping, video streaming and discounts at Whole Foods, for $139 a year or $14.99 a month.
This is part of the key and growth of Amazon’s business, with over 200 million members. In its latest financial report, the company reported that it booked more than $12 billion in net revenue from its subscription services in July, an increase of 12% from the same period last year. That figure includes annual and monthly fees related to Prime membership, as well as other subscription services such as the music and e-book platform.
The FTC said Amazon has intentionally made it difficult for customers to purchase items without subscribing to Prime. In some cases, consumers were presented with buttons to complete the transaction.
FTC complaints say getting out of a subscription is often too complicated, with Amazon leadership delaying or denying changes that made it easier to cancel.
Internally, Amazon called the process “Iliad.” This is a reference to an ancient Greek poem about the long siege of Trojans during the Trojan War. This process requires that customers assert on page 3 that they want to cancel their membership.
The FTC began investigating Amazon’s major subscription practices in 2021 in the first Trump administration, but the lawsuit was filed in 2023 under former FTC chairman Lina Khan, an anti-trust expert appointed by Biden.
As part of the terms of the settlement, Amazon is prohibited from misrepresenting the terms of the subscription. You must fully disclose the costs incurred and obtain the customer’s express consent to the claim. For example, you need a clear option to accept or reject the Prime subscription offered by your customers during your purchase, and you should avoid potentially confusing languages such as “Thank you, I don’t want free shipping.”
According to the settlement, automatic membership renewals must be clearly marked and the cancellation process must also be used.
