Amazon will pay a historic $2.5 billion settlement over its Prime membership after U.S. regulators argued the company swindled millions of users into paying for subscriptions that were intentionally difficult to cancel.
The Federal Trade Commission says Amazon has agreed to pay a historic $1 billion in civil penalties to the government, and another $1.5 billion in redress payments to affected customers. Amazon does not have to admit wrongdoing, NPR reported.
The surprise settlement comes as Amazon and the FTC were three days into a trial in the tech giant’s hometown, Seattle, where a jury was set to determine whether Amazon broke the law.
The FTC, which regulates competition, brought a lawsuit against the company in 2023, accusing Amazon of using “manipulative, coercive, or deceptive” designs to get shoppers to enroll in auto-renewing Prime subscriptions.
The regulators also claimed that Amazon created a purposefully convoluted, multi-step cancellation process to keep users from walking away from the program.
Under the settlement, Amazon is not allowed to misrepresent the terms of Prime. The company must now make clear disclosures about the terms of the program during enrollment, and have consumers express consent before charging them for a subscription, CNBC reported.
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