Amazon Regulators will pay $2.5 billion to resolve a federal trade commission complaint that the company announced Thursday that it encouraged users to pay for Prime membership.
A surprising settlement occurs as Amazon and the FTC were only three days into Seattle Federal Court. The argument for the opening of the lawsuit occurred Tuesday, but the settlement allows Amazon to avoid returning a verdict in court that would potentially damage the ju judge than its settlement with the FTC.
A lawsuit filed by the FTC under the Biden administration in June 2023 alleged that Amazon had deceived tens of millions of customers, blocked attempts to sign up for its major subscription program and cancel it. If ry umpire sided with the FTC, three senior Amazon executives were at risk of taking responsibility individually.
Amazon will pay the FTC a $1 billion civil penalty and refund $1.5 billion to an estimated 35 million customers affected by “unnecessary prime registration or postponed cancellations,” the agency said. Under the terms of the settlement, Amazon will waive up to $51 to eligible customers within 90 days.
Amazon did not admit fraud in agreeing to a resolution, the FTC said.
The agreement prohibits Amazon from misrepresenting Prime terms. The company also says it must make clear and pronounced disclosures about the terms of the program being registered, and Amazon must obtain the express consent of the consumer before charging the subscription. Amazon also needs to provide an easy way for users to cancel their subscription, the agency said.
Amazon said many of the changes outlined by the FTC were already instituted by the company a few years ago. The settlement requires that it maintain the sign-up and cancellation process that it is in place, the company said.
As part of the settlement, Amazon and two of its executives, Prime Boss Jamilgani and Neil Lindsay, are senior vice presidents of the health department of the company, previously playing a role in Prime Business, and will be banned from illegal activities.
FTC Chairman Andrew Ferguson called the penalty a “monologian victory” for agencies under the Trump administration.
“The Trump Vance FTC is committed to fighting back when businesses try to trick ordinary Americans from their hard-earned salaries,” Ferguson said in a statement.
Amazon spokesman Mark Bluffkin said in a statement that the company and its executives “we are always following the law and this settlement will allow us to focus on innovation for our customers.”
This penalty is one of the biggest ever imposed by the FTC. The agency in 2019 attacked Facebook, now known as Meta, and fined $5 billion for violating consumer privacy.
Still, the $2.5 billion fine is about 0.1% of Amazon’s market capitalization, currently close to $2.4 trillion. Amazon’s stock was on a slight rise in the announcement.
Launched in 2005, Amazon’s Prime program has become one of the world’s most popular subscription services, with over 2000 million members generating billions of dollars worldwide. Membership costs $139 per year and includes perks such as free shipping and access to streaming content. Data shows that Prime members shop more frequently than non-Prime members.
Amazon is still facing a bigger lawsuit at the FTC.
In 2023, regulators accused the company of illegally stifling competition in the e-commerce market. The FTC is joined by attorney generals from 17 states, claiming that Amazon uses “exclusive power” to inflate prices, reduce the quality of shoppers, illegally eliminate rivals, thereby undermining competition.
Amazon won a partial fire in the case last year, but is set to go to trial against the FTC in 2027.
Earlier this month, a US district judge overseeing Google’s anti-trust cases opposed the most serious consequences proposed by the Department of Justice, including forced sales of Google’s Chrome browsers. Google lost its lawsuit against the government last year, but it escaped having to sell its important assets.
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