Amazon is set to pay a historic $2.5 billion fine in a settlement with the Federal Trade Commission (FTC). The agency had alleged that the tech giant tricked customers into signing up for Amazon Prime and then made it confusing to cancel.
According to the FTC, the $2.5 billion settlement will be split into two different pools. Amazon will have to pay $1 billion in civil penalties — the second largest fine in FTC history.
The other $1.5 billion will be be paid to Amazon customers who were enrolled in Prime or were unable to cancel their subscription. Eligible consumers include people who may have signed up for Prime using the "Single Page Checkout" form between June 23, 2019 and June 23, 2025.
Additionally, the settlement requires Amazon to include a "clear and conspicuous button for customers to decline Prime." The company must also be clearer about the price, renewal frequency and cancellation procedures.
Amazon also has to create "an easy way for consumers to cancel Prime." And the company needs to pay for an independent, third-party supervisor to oversee the distribution of the restitution fees to customers.
Why the FTC sued Amazon
Before the settlement, the FTC's lawsuit against Amazon was supposed to enter trial this week and last at least a month. The government agency accused Amazon of tricking millions into inadvertently signing up for Prime in an initial suit that began in 2023.
"Amazon tricked and trapped people into recurring subscriptions without their consent, not only frustrating users but also costing them significant money,” former FTC Chair Lina M. Khan said in a release at the time.
Amazon was alleged to have violated section 5 of the FTC act, which prohibits "unfair" practices. The agency also accused Amazon of violating the Restore Online Shoppers Confidence Act from 2010, which asserts that companies must clearly disclose all terms to customers before billing forms and making cancellation simple.
Amazon isn't the only company accused of using "dark patterns" to manipulate customers, but it's the biggest company to get hit by a government lawsuit over the practice.
With the settlement, it could cause other etailers to alter how they operate to avoid similar fines from the FTC. The European Union is also looking to address these issues with the Digital Fairness Act, which could go into effect in 2027.
This settlement is the second biggest fine the FTC has ever handed down, following a $5 billion penalty against Facebook in 2019 over similar duplicitous allegations over transparency and user privacy.
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