Amazon has agreed to a landmark $2.5 billion settlement with the Federal Trade Commission (FTC) over allegations that it deceptively enrolled customers in its Prime membership program and created hurdles for those attempting to cancel the service. According to the FTC, the settlement consists of a $1 billion civil fine, the largest ever imposed by the agency, and $1.5 billion to be distributed to consumers who were unknowingly signed up for Prime or faced challenges in canceling their memberships.
The legal proceedings, initiated in Seattle two years ago, accuse Amazon of violating the Restore Online Shoppers’ Confidence Act among other legal breaches over a span exceeding ten years. However, Amazon has not admitted to any wrongdoing as part of the settlement and has yet to comment publicly on the resolution.
Prime memberships, a significant component of Amazon’s business strategy, offer benefits such as expedited shipping, streaming services, and discounts at Whole Foods, costing $139 annually or $14.99 monthly. As of its latest figures, Amazon reported more than 200 million Prime members, contributing to over $12 billion in net revenue from subscription services, marking a 12% increase year-over-year.
While Amazon asserts that it clearly communicates Prime’s terms and offers straightforward cancellation options, the FTC contends that the company made enrolling unavoidable for many customers. For example, purchasing items often led consumers to unknowingly subscribe to Prime. Once subscribed, canceling required navigating a multi-step process internally dubbed “Iliad,” an allusion to the epic Greek poem denoting prolonged challenges—comparable to the siege of Troy.
The FTC scrutinized Amazon’s Prime subscription practices beginning in 2021, resulting in legal action in 2023 under FTC Chair Lina Khan, noted for her antitrust expertise. This case precedes an antitrust lawsuit against Amazon that alleges its monopolistic grip on online markets.
This substantial settlement underscores the ongoing scrutiny and regulatory challenges facing major technology corporations, as authorities intensify efforts to ensure transparent consumer practices in digital spaces. In a broader context, this action by the FTC signifies a more assertive stance on enforcing consumer rights and holding large corporations accountable for deceptive practices.