Amazon to pay $1.5 billion to customers in FTC settlement

Amazon has agreed to a $2.5 billion settlement with the Federal Trade Commission, which took Amazon to court over allegedly “deceptive” Prime membership signups, the regulatory agency announced Thursday. Amazon was accused of violating both the FTC Act and the Restore Online Shoppers’ Confidence Act (ROSCA).

Per the terms of the settlement, Amazon will pay a $1 billion civil penalty and provide $1.5 billion in refunds to an estimated 35 million customers. If every one of those customers received an equal amount, they would be entitled to a refund of $42.86.

In its suit, the FTC alleged that Amazon used deceptive practices to sign up customers for its signature Prime membership program. Not only that, but the FTC argued that Amazon trapped customers by making it excessively difficult to cancel those memberships, even likening the cancellation process to a Homeric odyssey.

When the settlement was announced, Amazon was on the third day of a jury trial in a federal court in Seattle. Ultimately, a jury could have awarded even more damages or harsher fines. In 2024, Amazon facilitated $638 billion in sales, resulting in net income of $59.2 billion, facts that were unlikely to win a jury’s sympathy.

The FTC lawsuit was originally brought under the Biden administration in 2023, but FTC leaders were quick to credit the Trump administration for the large 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 in a press release. “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. Today, we are putting billions of dollars back into Americans’ pockets, and making sure Amazon never does this again.”

In addition to the $2.5 billion settlement, Amazon also agreed to make specific changes to its Prime membership sign-up and cancellation process.

According to the FTC, Amazon agreed to include “a clear and conspicuous button for customers to decline Prime.” In addition, “Amazon can no longer have a button that says, ‘No, I don’t want Free Shipping.'”

The company must also create a simple way to cancel Prime memberships, which “cannot be difficult, costly, or time-consuming and must be available using the same method that consumers used to sign up.” Finally, Amazon agreed to pay for a third-party monitor to ensure compliance with these agreements and the refund distribution.