Amazon agreed to pay up to $2.5 billion to settle claims that it tricked tens of millions of people into signing up for its Prime membership program, and then made it hard for customers to cancel when they wanted out.
The settlement announced on Thursday came days into a jury trial that began in Seattle this week over the issue, which stemmed from a lawsuit filed by the Federal Trade Commission in 2023.
The lawsuit cut to the heart of how Amazon defines itself as a champion for the hundreds of millions of consumers who regularly use its online shopping service. Though less sweeping than an antitrust case that the F.T.C. has filed against Amazon, the suit targeted the company for the way it runs a popular subscription program central to its business and ubiquitous in the lives of many of its customers.
An estimated 200 million people in the United States use Prime to shop on Amazon. Subscriptions, primarily Prime, brought in more than $44 billion last year, but Prime’s value to Amazon goes far beyond the monthly fees. Prime members are the company’s best customers: They buy more things, and buy more frequently, than people who are not signed up for the service. And the settlement will not fundamentally change how Amazon interacts with those customers.
“Nobody likes a trial,” said Josh Lowitz, a partner at Consumer Intelligence Research Partners, a research firm that has surveyed Prime customers for more than a decade. He said Prime was wildly popular, but Amazon clearly decided “that $2.5 billion and ending the story before the Christmas season was probably a good plan.”
The settlement shows a continued push by the Republican-led F.T.C. against the biggest tech companies, despite their executives’ many attempts to court President Trump. This year, Mr. Trump fired the two Democratic commissioners, leaving three Republican members leading the agency.
In 2023, Lina Khan, then the F.T.C.’s Democratic chair, filed a suit against Amazon accusing it of squeezing third-party sellers on its marketplace and favoring its own services in a way that raised cost for consumers. The case is active, and Amazon denies the claims.
In the Prime case, Amazon agreed to pay $1 billion in penalties and between $1 billion and $1.5 billion in payouts to customers, who could get $51 each if they qualify. The agency said it was one of the largest settlements in its history.
Amazon did not admit or deny wrongdoing in agreeing to settle.
“Amazon and our executives have always followed the law and this settlement allows us to move forward and focus on innovating for customers,” Mark Blafkin, a company spokesman, said in a statement.
He added that Amazon worked hard to make it clear and simple for customers to sign up or cancel their Prime membership and “we look forward to what we’ll deliver for Prime members in the coming years.”
The F.T.C. chairman, Andrew Ferguson, has been a vocal critic of the biggest tech companies, which he has accused of stifling speech and using their power to crush competition. He’s continued to pursue antitrust lawsuits against Amazon and Meta that began with his Republican and Democratic predecessors, and has started investigations into artificial intelligence companies over concerns about children using chatbots, as well as tech giants’ investments in A.I. start-ups.
Bill Kovacic, former chair of the agency, said Mr. Ferguson was particularly motivated by the power Amazon, Meta, Google and other tech platforms had over speech. He’s using his levers to enforce consumer protection and antitrust laws to rein in the power of the platforms, Mr. Kovacic said. The agency, he expected, will continue its charge against the technology giants.
“I regard this as a significant outcome, and I think it means that commission is serious in its commitment to challenge serious fraud, especially the fraudulent conduct of the big tech companies,” Mr. Kovacic said.
“We got more than we even originally told the judge we needed — $1.5 billion going back to consumers — and a billion dollars in civil penalties to make sure that Amazon knows you can’t get away with this kind of conduct again,” Mr. Ferguson said in an interview on Fox Business Network.
The F.T.C. case centers on the idea of “dark patterns” — whether a website’s design knowingly steers customers into subscriptions they don’t really want or makes it too complicated for them to cancel.
For example, it documented that when someone wanted to buy an item, Amazon showed a page with an orange button that blared “Get FREE Same-Day Delivery” that would enroll the customer in Prime. If someone didn’t want to enroll in Prime, the only way to proceed with a purchase was to click a small text link that read: “No thanks, I do not want FREE delivery.”
Amazon had argued that its practices were standard for the industry. Under the terms of the settlement, that kind of language would be explicitly prohibited, though Amazon said it would be able to maintain the sign-up and cancellation process that had been in place for several years.
The company and the F.T.C. had been discussing a settlement for a while, and they continued the conversation even as the trial’s first witness, a former Amazon employee, took the stand on Tuesday and testified that the company was aware some people unwittingly enrolled in Prime, according to two people familiar with the talks who were not authorized to speak publicly.
The settlement with the company expires after 10 years. Two executives who have overseen Prime, Neil Lindsay and Jamil Ghani, agreed to personally abide by the commitments for three years.
Under the agreement, Amazon will within 90 days give $51 to customers who went through the sign-up process that the F.T.C. had questioned. To qualify, customers must fit certain criteria, such as signing up between June 23, 2019 and June 23, 2025 and barely using Prime benefits like video streaming after they enrolled.
Amazon will also notify other customers that they can submit a claim if they believe that they unintentionally enrolled in the program or wanted to cancel but were induced not to by offers during the cancellation process. The company will pay between $1 billion and $1.5 billion to customers, depending on how many make claims.
Some tech policy experts say the action isn’t strong enough to deter similar behavior.
“Ordinary people would go to jail for this kind of fraud, but Amazon and its corporate executives can write a meager check to skip their day in court while keeping their jobs and reputations intact,” said Nidhi Hegde, executive director of the American Economic Liberties Project, a left-leaning organization.
After the settlement was filed with the court, Judge John H. Chun excused the nine jurors and concluded the trial.
Karen Weise writes about technology for The Times and is based in Seattle. Her coverage focuses on Amazon and Microsoft, two of the most powerful companies in America.
Cecilia Kang reports on technology and regulatory policy for The Times from Washington. She has written about technology for over two decades.
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