Amazon has agreed to a historic $2.5 billion settlement with the Federal Trade Commission (FTC) over allegations that it misled consumers into signing up for its Prime subscription service and made it difficult for them to cancel. The settlement, announced Thursday (September 25), concludes a two-year legal dispute between the e-commerce giant and the FTC.

The agreement includes a $1 billion civil penalty and $1.5 billion in refunds to approximately 35 million customers affected by the deceptive practices. According to the FTC, this is the largest civil penalty ever imposed in a case involving an FTC rule violation and the second-highest restitution award obtained by the agency.

The lawsuit, filed in 2023, accused Amazon of using sophisticated subscription traps to enroll customers in Prime and then making it exceedingly hard for them to cancel. FTC Chairman Andrew Ferguson called the settlement a "monumental win" for consumers, stating, "The Trump-Vance FTC is committed to fighting back when companies try to cheat ordinary Americans out of their hard-earned pay."

Amazon, while agreeing to the settlement, did not admit to any wrongdoing. The company emphasized its commitment to customer satisfaction, with spokesperson Mark Blafkin stating, "We work incredibly hard to make it clear and simple for customers to both sign up or cancel their Prime membership."

As part of the settlement, Amazon is required to provide clear disclosures about Prime's terms during enrollment and offer easy cancellation options. The company must also obtain express consent from customers before charging them for a subscription.

Despite the financial impact, the settlement represents only 5.6% of Prime's subscription revenue from the previous year, which totaled $44 billion. Amazon's Prime service, launched in 2005, has become one of the world's most popular subscription services, boasting over 200 million members globally.

Bill Handel