Joe Mabel
Landmark Settlement Marks FTC’s Largest Civil Penalty
Amazon has agreed to a $2.5 billion (£1.9bn) settlement with the U.S government to resolve allegations that it misled millions of customers into signing up for its Prime membership and made the cancellation process intentionally difficult. The Federal Trade Commission (FTC) announced the proposed deal just days after a jury trial began in Seattle, hailing it as a historic win that resulted in the largest civil penalty ever secured by the agency.
The settlement includes $1.5 billion earmarked for customer refunds, targeting individuals who were allegedly tricked into enrolling in Prime between June 2019 and June 2025. Approximately 35 million U.S. customers could be eligible for compensation of up to $51 each.
Refund Process and Eligibility
According to the FTC, Amazon has agreed to automatically issue refunds to customers who used Prime benefits fewer than three times within a year of enrollment. Consumers who used the service fewer than ten times within a year may still qualify for refunds but will be required to file a claim.
Prime membership, which offers free shipping, access to streaming services, and other perks, costs $139 annually or $14.99 monthly in the U.S., and £95 annually in the UK.
FTC’s Allegations Against Amazon
The FTC’s lawsuit accused Amazon of employing “dark patterns” to nudge consumers into subscribing. This included pop-ups during checkout that heavily promoted Prime enrollment, billing collection practices that lacked transparency, and unclear trial terms that automatically converted into paid memberships.
FTC Chairman Andrew Ferguson stated:
“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.”
Internal Amazon documents cited by the FTC revealed company executives had privately acknowledged the questionable nature of these tactics, with one noting that “subscription driving is a bit of a shady world.”
Restrictions on Future Practices
Under the settlement terms, Amazon will no longer be permitted to display misleading prompts such as “No, I don’t want free shipping,” which pressured users into Prime sign-ups. The company must also introduce a clear and simple cancellation process.
The settlement follows prior adjustments Amazon had already made to its subscription practices in response to regulatory scrutiny.
Amazon’s Response
Amazon, while agreeing to the settlement, neither admitted nor denied the allegations. The company maintains it has always operated within legal boundaries.
Mark Blafkin, an Amazon spokesperson, said:
“Amazon and our executives have always followed the law, and this settlement allows us to move forward and focus on innovating for customers. We have worked incredibly hard to make it clear and simple for customers to both sign up or cancel their Prime membership.”
Political and Regulatory Context
The lawsuit was initially filed in 2023 under then-FTC Chair Lina Khan, a known critic of Big Tech practices. Despite a change in leadership, Ferguson—appointed by President Donald Trump earlier this year—has continued pursuing a tough stance on technology companies.
However, some consumer advocacy groups criticized the FTC for stopping short of broader regulatory reforms. The Biden-era “Click-to-Cancel” rule, which required companies to offer easy subscription cancellations, was overturned by an appeals court earlier this year.
Nidhi Hegde, executive director of the American Economic Liberties Project, said:
“Enough with this game of whack-a-mole. If the Commission is serious about protecting people from deceptive subscription schemes, it should re-issue the Click-to-Cancel rule today.”
Conclusion
The $2.5 billion settlement underscores a growing pushback against deceptive subscription practices within the tech industry. While the FTC celebrates its record-breaking penalty, critics argue that without permanent regulatory safeguards, companies will continue to devise new methods to trap consumers into recurring charges.
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