Amazon to pay $2.5bn for allegedly duping millions to sign up for Prime

The Federal Trade Commission (FTC) and Amazon have reached a groundbreaking $ 2.5 billion settlement, alleging that the online retailer swindled customers into buying Prime memberships and made it difficult for them to cancel.

The Seattle company will pay $1.5 billion in civil penalties, the largest fine in the history of the agency for a rule violation, and $1.5 billion will be refunded to customers who unintentionally enrolled in Prime or were prevented from canceling their subscriptions, according to the company’s statement on Thursday.

The surprise settlement comes shortly after the trial’s opening in Seattle, Washington, this week. The Restore Online Shoppers’ Confidence Act, a 2010 law intended to make sure that people are aware of what they are being charged for online, serves as the case’s central concern.

According to FTC officials, Amazon was facing a wall, and the consumer refund amount was higher than the agency’s expert projections.

“I believe it only took them a few days to realize how bad they were going to be.” And during the settlement negotiations, Bureau of Consumer Protection director Chris Mufarrige said, “They came to us and they paid out.”

However, Amazon asserted that it was confident in winning the case, but that it would rather go through the trial and appeal process sooner. The case, which was first filed two years ago, was not about any wrongdoing, according to the company.

According to spokesman Mark Blafkin, “Amazon and our executives have always followed the law, and this settlement allows us to move forward and concentrate on creating new products for our customers.” We work incredibly hard to provide significant value to our many millions of devoted Prime members around the world while making it simple and clear for customers to sign up for or cancel their Prime membership.

The settlement is advantageous for both consumers and the FTC because Amazon generates about $ 2.5 billion in sales every 33 hours. After the news, Amazon’s shares remained essentially unchanged.

Those who may have signed up for a membership through the company’s “Single Page Checkout,” among other links, between June 23, 2019, and June 23, 2025 are among the Prime customers who are eligible for automatic refunds of up to $51. Within 90 days of the settlement order, those clients will receive a refund.

More than 30 million customers who may have been impacted by the other problems at the heart of the FTC case, including its cancellation process, are also on the hook for setting up a claims procedure.

I don’t want free shipping, you say?

For a monthly fee of $139, or $14.99 per month, Amazon Prime offers subscribers benefits like faster shipping, streaming of videos, and Whole Foods discounts.

With more than 200 million users, it is a significant and expanding component of Amazon’s business. The business reported in its most recent financial report in July that subscription services had generated more than $ 12 billion in net revenue, a 12 percent increase over the same period last year. The figure includes both annual and monthly fees for Prime memberships as well as for other recurring subscription services like its music and e-book platforms.

According to the FTC, Amazon purposefully prevented customers from making purchases without also registering for Prime. Customers were given a button to complete their purchases in some cases, which did not explicitly state whether they would also be enrolled in Prime, according to the organization.

According to an FTC complaint, Amazon leadership slowed or rejected changes that would have made canceling easier. Getting out of a subscription was frequently too difficult.

The process was referred to as “Iliad,” an internal translation of an ancient Greek poem about the drawn-out siege of Troy during the Trojan War. The customer must state on three pages whether they want to cancel their membership.

The lawsuit was filed in 2023 under former FTC Chair Lina Khan, an antitrust expert who had been appointed by Biden, after the FTC began looking into Amazon’s Prime subscription practices in 2021 during the first Trump administration.

Amazon is prohibited from misrepresenting the terms of the subscriptions in the settlement terms. It must fully disclose the costs that will be incurred and obtain the customer’s express approval for the charge. For instance, it must have clear instructions for customers to accept or reject a Prime subscription when making a purchase, avoiding potentially confusing phrases like “No thanks, I don’t want free shipping.”

Source: Aljazeera