Amazon to refund $2.5 billion to Prime subscribers in US as settlement over deceptive enrolments

Amazon agreed to pay $1.5 billion in refunds to customers of its Prime subscription as part of a larger settlement with the Federal Trade Commission (FTC) over allegations it tricked people into signing up for the free shipping service and made it difficult to cancel.

According to FTC’s statement, “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 enrolment practices, and cease unlawful enrolment and cancellation practices for Prime.”

“Today, the Trump-Vance FTC made history and secured a record-breaking, monumental win for the millions of Americans who are tired of deceptive subscriptions that feel impossible to cancel,” said FTC Chairman Andrew N Ferguson. 

“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. The Trump-Vance FTC is committed to fighting back when companies try to cheat ordinary Americans out of their hard-earned pay,” Ferguson added.

The FTC has charged Amazon and several Amazon executives with knowingly misleading millions of consumers into enrolling in Prime, violating the FTC Act and the Restore Online Shoppers’ Confidence Act (ROSCA). 

Amazon accused of deception

The FTC alleged Amazon created confusing and deceptive user interfaces to lead consumers to enrol in Prime without their knowledge. Compounding these deceptive enrolment practices, Amazon also created a complex and difficult process for consumers seeking to cancel their Prime subscription, with the goal of preventing consumers from cancelling Prime. Amazon documents discovered in the lead up to trial showed that Amazon executives and employees knowingly discussed these unlawful enrolment 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”. 

Additionally, the settlement requires Amazon to stop their unlawful practices and make meaningful changes to the Prime enrolment and cancellation flows by:

Including a clear and conspicuous button for customers to decline Prime. Amazon can no longer have a button that says, “No, I don’t want Free Shipping.”

Including clear and conspicuous disclosures about all material terms of Prime during the Prime enrolment process, such as the cost, the date and frequency of charges to consumers, whether the subscription auto-renews, and cancellation procedures.

Creating an easy way for consumers to cancel Prime, using the same method that consumers used to sign up. The process cannot be difficult, costly, or time-consuming and must be available using the same method that consumers used to sign up; and

Paying for an independent, third-party supervisor to monitor Amazon’s compliance with the consumer redress distribution process.

The Commission vote approving the stipulated final order was 3-0. The FTC filed the proposed order in the US District Court for the Western District of Washington.