Amazon will refund $1.5B to Prime subscribers in $2.5B settlement with FTC
Amazon will refund $1.5 billion to Prime subscribers in $2.5 billion FTC settlement
E-commerce giant Amazon agreed Thursday to pay $1.5 billion in refunds to customers of its Prime subscription as part of a larger settlement with the Federal Trade Commission over allegations it tricked people into signing up for the free shipping service and made it difficult to cancel.
The refunds are in addition to a $1 billion fine Amazon will pay the government, for a total settlement of $2.5 billion, one of the largest in U.S. history.
The settlement requires Amazon to automatically refund $51 to anyone who signed up for Prime through a deceptive sign-up process and only used the service three times in a 12-month period. The company will also have to send a form to people who used the service more to give them a chance to apply for a refund, too.
“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,” FTC Chairman Andrew Ferguson said in a statement Thursday.
“Amazon and our executives have always followed the law and this settlement allows us to move forward and focus on innovating for customers,” Amazon spokesperson Mark Blafkin said in a statement. “We work incredibly hard to make it clear and simple for customers to both sign up or cancel their Prime membership.” (Amazon founder Jeff Bezos owns The Washington Post.)
The Amazon settlement is the latest in a series of court cases and fines from the U.S. government against Big Tech companies under the Biden and Trump administrations.
Last year, a federal judge found Google guilty of holding an illegal monopoly in web search. A judge is reviewing submissions made in another court case between Meta and the FTC. Apple is also facing a lawsuit from the Department of Justice. In 2019, the FTC fined Meta $5 billion for misleading its users about its privacy controls.
The deal spares Amazon from facing a jury trial that began in the company’s hometown of Seattle this week. Last year, a jury in San Francisco found Google guilty of holding an illegal monopoly over app distribution on Android phones due to its app store.
The “trial’s continuation might have risked more unfavorable publicity for the company and made it appear insensitive to customer complaints, particularly because Amazon wants to be seen as a consumer-friendly business,” said Carl Tobias, a professor at the University of Richmond School of Law.
The fine announced Thursday rivals some of the large penalties the European Union has imposed on Big Tech companies over the past several years for violations of privacy and competition laws. The settlement is also a fraction of the nearly $60 billion Amazon made in profit in 2024. The company’s stock was down less than 1 percent after the deal was announced.
Antitrust advocates said the refunds and fine were not enough to compensate for Amazon’s treatment of consumers. “After defrauding tens of millions of people with an intentionally labyrinthine cancellation process, the FTC is allowing Amazon and its executives to walk away scot-free,” said Nidhi Hegde, executive director of the American Economic Liberties Project, a think tank that advocates for stricter antitrust regulations.
Refunds or restitution for customers aren’t unusual when government watchdogs sue companies over allegations of misleading subscription terms, though they’re rarely as large as the refunds required in the Prime settlement.
In the past year, the New York attorney general largely won a court ruling against SiriusXM for making its audio subscription cancellations onerous and reached a settlement with fitness chain Equinox to change its subscription practices in the state.
Some customers of those two companies were entitled to refunds or restitution. The total to be potentially paid to consumers has not been clear, but New York Attorney General Letitia James said that Equinox customers could apply for up to $250 in refunds if they had complained about onerous subscription terms.
In July, a U.S. appeals court blocked a proposed rule from the FTC that would have required companies to make online subscriptions as easy to cancel as they were to sign up. Some consumer advocates said they wanted the agency to go after deceptive or difficult-to-cancel subscriptions using existing U.S. laws and regulations, such as the ones that the FTC used in the Prime lawsuit.
See also:
Amazon heads into FTC jury trial over prime cancellation claims
Aaron Schaffer contributed to this report.
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