Amazon has agreed to pay $2.5 billion to settle a lawsuit with the US Federal Trade Commission. The FTC has accused the company of tricking millions of customers into signing up for Prime and making it hard to cancel through blocks, repeated pop-ups, and other deceptive methods.
The settlement calls for $1 billion as a fine and $1.5 billion for refunds to the customers affected by the controversy. Amazon did not admit wrongdoing or that it broke the law, but agreed to engage in fairly substantial changes to its Prime subscription business.
The FTC lawsuit alleged that Amazon used confusing designs, called "dark patterns," to make people sign up for Prime without knowing it. The cancellation process was called a "maze" that stopped people from leaving the service. Internal papers and reports called the issue an "unspoken cancer."
According to the settlement, Amazon will pay up to $51 to each customer affected by misleading sign-ups or hard-to-cancel subscriptions. About 35 million customers may get refunds automatically. Others can apply for refunds if they meet certain conditions.
Two Amazon executives, Neil Lindsay and Jamil Ghani, are banned from using misleading methods for Prime subscriptions. A third executive, Russell Grandinetti, is no longer part of the case.
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The company has also been ordered to make it easier for customers to cancel their Amazon Prime subscription. The e-commerce giant is expected to show pricing, auto-renewal rules, and cancellation steps. A “decline Prime” button will be added to help people opt out. A third-party monitor will check that these changes are followed.
FTC Chairman Andrew Ferguson called the settlement “historic” and said it protects customers from deceptive practices. The settlement will last 10 years and shows that big companies can be held accountable.
Amazon Prime has more than 200 million subscribers worldwide and brings in billions of dollars in revenue every year. This case is considered one of the biggest consumer protection settlements in the history of the FTC. It stresses the need for consumers to have clearly defined and fairly charged subscription services.