Amazon will pay a historic $2.5 billion settlement to the Federal Trade Commission (FTC), the agency announced Thursday, ending a two-year dispute over allegations that the tech giant tricked consumers into subscribing to its Prime membership service and then made the cancellation process excessively difficult.

 

The agreement requires Amazon to pay a $1 billion civil penalty and provide $1.5 billion in refunds to an estimated 35 million customers who were “harmed by their deceptive Prime enrollment practices.” The FTC noted that this is the largest civil penalty in a case involving an FTC rule violation and the second-highest restitution award the agency has ever obtained.

 

 

 

The settlement was reached just a few days into a scheduled trial between the FTC and Amazon. The original lawsuit was filed in 2023 under the Biden administration over the company’s cancellation policies.

 

 

 

 

FTC Chairman Andrew Ferguson praised the decision, stating: “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.” He added that evidence showed Amazon used “sophisticated subscription traps” designed to manipulate consumers into enrolling.

 

 

 

Amazon spokesperson Mark Blafkin issued a statement saying the company and its executives did not admit to any wrongdoing and maintained they “have always followed the law.” He added that the settlement allows them to “move forward and focus on innovating for customers” and that they work hard to make signing up or canceling Prime “clear and simple.”

 

 

 

 

The settlement mandates several key changes to Amazon’s checkout process, including the elimination of the “No, I don’t want Free Shipping” button. The company must also include “clear and conspicuous disclosures” about Prime’s terms during enrollment and provide “easy ways” for customers to cancel the program.

 

 

 

Prime, which costs $14.99 per month or $139 annually, is a hallmark of Amazon’s offerings, now including streaming entertainment, grocery, and fuel perks, in addition to fast delivery.

 

 

 

The $2.5 billion payout represents 5.6% of Prime’s subscription revenue last year, which totaled $44 billion.

 

 

 

Former FTC chair Lina Khan, who was leading the agency when the lawsuit was filed, criticized the settlement, arguing that reaching an agreement just days into the trial rescued Amazon “from likely being found liable for having violated the law,” allowing the company to “pay its way out.” Khan called the fine “a drop in the bucket for Amazon.”