Years after the Federal Trade Commission filed a complaint against Amazon.com, Inc., for deceptive practices, a “historic” $2.5 billion order with the company has been secured, the commission said this week.
“Amazon will be required to pay a $1 billion civil penalty, provide $1.5 billion in refunds back to consumers harmed by their deceptive Prime enrollment practices, and cease unlawful enrollment and cancellation practices for Prime,” said a Thursday press release from the FTC. That’s the largest civil penalty ever in a case involving an FTC rule violation and the second-highest restitution award ever obtained by FTC action.
In addition to Amazon.com – an online retail giant founded by sometimes-richest-man-in-the-world Jeff Bezos that has been led by CEO Andy Jassy since 2021 – the FTC filed the complaint against Amazon Senior Vice President Neil Lindsay and Vice President Jamil Ghani. It charged the defendants with “knowingly misleading millions of consumers into enrolling in Prime, violating the FTC Act and the Restore Online Shoppers’ Confidence Act (ROSCA).”
What happened?
Prime is a subscription service that provides several perks for members, including expedited delivery, exclusive deals, unlimited streaming and more. As of this Saturday, an Amazon Prime membership cost $14.99 per month plus tax. By last April, there were an estimated 180 million Prime subscriptions, Bloomberg reported.
According to the FTC, Amazon allegedly created confusing and deceptive user interfaces that lead customers to enroll in Prime without their knowledge. Once people were enrolled in Prime, it was also complicated and difficult to cancel their subscription, per the FTC allegations.
“Amazon documents discovered in the lead up to trial showed that Amazon executives and employees knowingly discussed these unlawful enrollment and cancellation issues, with comments like ‘subscription driving is a bit of a shady world’ and leading consumers to unwanted subscriptions is ‘an unspoken cancer,’” the commission said.
In a June 2023 press release, the FTC also said that: “Amazon used manipulative, coercive, or deceptive user-interface designs known as ‘dark patterns’ to trick consumers into enrolling in automatically-renewing Prime subscriptions.”
With the new settlement, Amazon is required to stop any unlawful practices and to make “meaningful changes to the Prime enrollment and cancellation flows,” the FTC said Thursday.
“Today, we are putting billions of dollars back into Americans’ pockets, and making sure Amazon never does this again,” said FTC Chairman Andrew N. Ferguson. “The Trump-Vance FTC is committed to fighting back when companies try to cheat ordinary Americans out of their hard-earned pay.”
“Amazon and our executives have always followed the law and this settlement allows us to move forward and focus on innovating for customers,” the company said in its own Thursday statement. “We work incredibly hard to make it clear and simple for customers to both sign up or cancel their Prime membership, and to offer substantial value for our many millions of loyal Prime members around the world. We will continue to do so, and look forward to what we’ll deliver for Prime members in the coming years.”
Who gets settlement payments?
Per the final settlement, eligible consumers enrolled in an Amazon Prime subscription through a “Challenged Enrollment Flow” and who used no more than three Prime Benefits in any 12-month period following enrollment.
Amazon is expected to pay those consumers for the total amount of Amazon Prime membership fees paid during the duration of that Amazon Prime subscription, up to $51. These consumers do not need to submit claims and payments should be distributed within 90 days of settlement order entry.
There are other potentially eligible consumers who will have to go through a claims process. These consumers must meet a definition of eligible consumers included in the settlement and have used no more than 10 Prime Benefits during any 12-month period of enrollment. Per the settlement, Amazon will establish and administer this claims process. Eligible consumers should receive claims forms from the company.