Amazon Agrees to Historic $2.5 Billion FTC Settlement Over Prime Membership Practices

The Federal Trade Commission initiated an investigation into Amazon's Prime subscription practices during the initial Trump administration.

Amazon has agreed to a landmark $2.5 billion settlement with the Federal Trade Commission over allegations that the e-commerce giant misled customers into signing up for Prime memberships and created unnecessary obstacles for cancellation.

The Seattle-based company will pay an unprecedented $1 billion in civil penalties - the largest ever imposed by the FTC for a rule violation - plus an additional $1.5 billion in consumer refunds for those who were unwittingly enrolled in Prime or faced difficulties when attempting to cancel their subscriptions, the agency announced on Thursday.

This unexpected settlement comes merely days after the trial commenced in US District Court in Seattle. The case centers around the Restore Online Shoppers' Confidence Act, legislation from 2010 designed to ensure transparency in online charges.

FTC officials indicated that Amazon was in a precarious position, with the consumer refund amount exceeding the agency's expert projections. "I think it just took a few days for them to recognize they were heading toward defeat. They approached us and paid out," explained Chris Mufarrige, director of the Bureau of Consumer Protection, regarding the settlement negotiations.

Amazon, however, maintained it was confident in winning the case but chose a quick resolution rather than enduring potentially years of trial and appeals. The company admitted no wrongdoing in the lawsuit, which was initially filed two years ago.

"Amazon and our executives have consistently adhered to the law, and this settlement allows us to move forward and concentrate on innovating for customers," stated spokesperson Mark Blafkin. "We strive to make the Prime membership signup and cancellation processes clear and straightforward, while delivering substantial value to our many millions of loyal Prime members worldwide."

Certain Prime customers eligible for automatic refunds up to $51 include those who may have registered through the company's "Single Page Checkout" or similar pathways between June 23, 2019, and June 23, 2025. These customers will receive reimbursement within 90 days of the settlement order.

Amazon must also establish a claims process for more than 30 million customers potentially affected by other issues central to the FTC case, including its cancellation procedures.

Amazon Prime offers subscribers benefits including expedited shipping, video streaming services, and Whole Foods discounts for $139 annually or $14.99 monthly.

The service represents a crucial and expanding segment of Amazon's business, with over 200 million members. In its most recent financial report from July, the company recorded more than $12 billion in net revenue from subscription services, a 12% increase year-over-year. This figure encompasses both Prime membership fees and other subscription offerings like music and e-book platforms.

The FTC alleged that Amazon deliberately complicated the process of purchasing items without also subscribing to Prime. In some instances, consumers encountered buttons to complete transactions that didn't clearly indicate Prime enrollment would also occur.

Subscription cancellation was often unnecessarily complex, with Amazon leadership reportedly slowing or rejecting changes that would have simplified the process, according to the FTC complaint.

Internally, Amazon referred to this cancellation process as "Iliad," referencing the ancient Greek poem about the prolonged siege of Troy. The process required customers to confirm their cancellation intent across three separate pages.

The FTC began examining Amazon's Prime subscription practices in 2021 during the first Trump administration, though the lawsuit was filed in 2023 under former FTC Chair Lina Khan, an antitrust expert appointed by President Biden.

The agency filed this case months before submitting an antitrust lawsuit against Amazon, accusing the company of monopolistic control over online markets.

In 2019, Facebook (now Meta) received a $5 billion fine for violating an FTC order regarding user privacy. Amazon's penalty represents the largest such fine for violating an FTC rule applicable to all companies.

Under the settlement terms, Amazon is prohibited from misrepresenting subscription terms. The company must fully disclose all costs and obtain explicit customer consent for charges. For example, it must provide clear options for customers to accept or decline Prime subscription offers during purchases, avoiding potentially misleading language such as: "No thanks, I don't want free shipping."

Automatic membership renewals must be clearly marked, and the company is required to implement a cancellation process that is not "difficult, costly, confusing or time consuming," according to the settlement.

Amazon stated that the settlement doesn't mandate additional changes - only maintenance of its current sign-up and cancellation processes implemented in recent years.