Amazon agreed to pay $2.5 billion to settle a Federal Trade Commission case over whether it duped customers into signing up for Prime and made it difficult for customers to cancel their membership.
As part of the settlement, announced Thursday, Amazon will provide $1.5 billion in refunds to customers that were harmed by what FTC referred to as “deceptive Prime enrollment practices.” About 35 million Prime customers who were impacted by the practices could qualify for $51 each as part of the settlement, the FTC said in legal documents.
Amazon is also required to pay a $1 billion civil penalty, the largest in any FTC rule violation case to date. The FTC said the $1.5 billion payout to customers is the second highest restitution award in the agency’s history.
Prime customers who are eligible for the payout include those who may have signed up for a membership via the company’s “Single Page Checkout” between June 23, 2019 to June 23, 2025.
“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 N. Ferguson said in a statement, adding, “Today, we are putting billions of dollars back into Americans’ pockets, and making sure Amazon never does this again.”
Amazon neither admitted nor denied the allegations in the complaint, according to the legal documents. The company didn’t immediately respond to a request for comment.
In addition to offering compensation to impacted customers, Amazon is also required to make changes to its Prime enrollment and cancellation practices, including adding a “clear and conspicuous” button to its site for customers to decline a Prime membership offer.
In addition, the e-commerce giant will have to make it easier for Prime members to cancel their membership.
“The process cannot be difficult, costly, or time-consuming,” the FTC said in its statement.
Amazon Prime provides subscribers with perks that include faster shipping, video streaming and discounts at Whole Foods for a fee of $139 annually, or $14.99 a month.
It’s a key and growing part of Amazon’s business, with more than 200 million members. In its latest financial report, the company reported in July that it booked more than $12 billion in net revenue for subscription services, a 12% increase from the same period last year.
That figure includes annual and monthly fees associated with Prime memberships, as well as other subscription services such as its music and e-books platforms.
The Associated Press
contributed to this report.
Mary Cunningham
Mary Cunningham is a reporter for CBS MoneyWatch. Before joining the business and finance vertical, she worked at “60 Minutes,” CBSNews.com and CBS News 24/7 as part of the CBS News Associate Program.
