Amazon to Pay $2.5 Billion Settlement Over ‘Deceptive’ Prime Practices

Amazon agreed to pay $2.5 billion to settle claims that it knowingly misled customers into renewing their Prime subscriptions after a Business Insider investigation revealed executives knew how confusing the cancellation process was and shelved proposals to fix it.

The Federal Trade Commission announced the “record-breaking” settlement on Thursday, which includes a commitment from Amazon to pay $1.5 billion in refunds to impacted customers and make changes to the Prime cancellation process. The additional $1 billion fine is “the largest ever in a case involving an FTC rule violation.”

The settlement came just days after Amazon’s trial in Seattle began.

The FTC’s suit stemmed from previous Business Insider reporting that found Amazon was internally aware that its users found the Prime cancellation process laborious and confusing and decided not to implement proposed solutions.

Internal Amazon documents obtained by Business Insider revealed that an internal project to develop a drawn-out process for Prime cancellation was called “Iliad” after Homer’s epic poem.

The internal documents showed that after the program launched, cancellations dropped by 14% in 2017.

“Fittingly, Amazon named that process ‘Iliad,’ which refers to Homer’s epic about the long, arduous Trojan War,” the FTC wrote in one of its court filing in the case. “Amazon designed the Iliad cancellation process (‘Iliad Flow’) to be labyrinthine.”

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In a statement, Amazon, which did not admit wrongdoing in its settlement with the FTC, said that its executives “have always followed the law.”

“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, and to offer substantial value for our many millions of loyal Prime members around the world,” the spokesperson added. “We will continue to do so, and look forward to what we’ll deliver for Prime members in the coming years.”

‘Record-breaking’ settlement requires Amazon to make changes to Prime cancellation process

On Thursday, the FTC trumpeted the $2.5 billion Amazon had agreed to pay as a “record-breaking” settlement.

“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,” said FTC Chairman Andrew N. Ferguson said in a statement.

Shares of Amazon dipped slightly after the unexpected announcement. Amazon’s market cap is roughly $2.25 trillion, meaning the settlement is less than 0.1% of the company’s overall value.

The $1.5 billion in customer refunds is for an estimated 35 million consumers impacted, the FTC said. According to the agency, it is the second-highest restitution award obtained by the FTC.

As part of the settlement, Amazon must create “an easy way for consumers to cancel Prime,” the FTC said. The company can also no longer have a button that says “No, I don’t want Free Shipping.” Amazon must also pay for independent, third-party monitoring to ensure it complies with the terms of the settlement.

The FTC first sued Amazon in 2023. According to the lawsuit, Amazon had violated the Restore Online Shoppers’ Confidence Act, which banned deceptive online sales practices. In court filings, the FTC cited Business Insider’s reporting and said it had evidence that Amazon executives were aware of how confusing the Prime cancellation process was and did not remedy the issue.

“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,” Ferguson said in a statement.

Former FTC Chair Lina Khan, who led the agency during the Biden administration, slammed the decision to settle the case.

“A couple of days into trial @FTC announces it has settled all charges, rescuing Amazon from likely being found liable for having violated the law and allowing it to pay its way out,” Khan wrote on X. “A $2.5 billion fine is a drop in the bucket for Amazon and, no doubt, a big relief for the executives who knowingly harmed their customers.”

All three Republican FTC commissioners, including Ferguson, voted in favor of the settlement. Earlier this year, President Donald Trump fired two Democratic commissioners. Both commissioners have challenged their removal. On Monday, the Supreme Court ruled that Trump could fire Commissioner Rebecca Kelly Slaughter while it considers her case.