Amazon To Pay Record $2.5 Bln FTC Settlement Over Prime Enrollment Practices

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(RTTNews) - After a two-year legal battle over claims that it deceived customers into signing up for Prime and then made cancellation extremely difficult, Amazon has agreed to a $2.5 billion settlement with the Federal Trade Commission.

A $1 billion civil penalty and $1.5 billion in refunds to an estimated 35 million customers are part of the agreement. It is the second-largest restitution award in the FTC's history and the largest civil penalty ever imposed for a rule violation, the agency said.

The settlement comes after Amazon was accused of using "subscription traps" to encourage Prime signups while hiding cancellation options in a lawsuit brought in 2023 during the Biden administration. It was a "monumental win" against deceptive practices, according to FTC Chairman Andrew Ferguson.

Amazon stated that the agreement enables the business to proceed and keep its customers as its top priority, without acknowledging any wrongdoing. The business stated that it has already improved its enrollment and cancellation procedures, adding easier to use opt out tools and more transparent disclosures.

One of Amazon's best-known services, Prime costs $14.99 a month or $139 annually, and last year brought in $44 billion in subscription revenue. With an estimated 200 million members in the US, Prime is a key component of the business's retail and digital ecosystem, according to analysts.

Analysts say the payout, which is slightly more than 5 percent of Prime's yearly revenue is unlikely to undermine the program's dominance, despite critics like former FTC chair Lina Khan claiming the settlement allows Amazon to "pay its way out."