AP
- Amazon settled with the FTC for $2.5 billion over Prime subscription practices.
- The settlement follows Business Insider’s investigation revealing misleading Prime sign-up tactics.
- Amazon must pay penalties, refund consumers, and change Prime enrollment processes.
Amazon reached a $2.5 billion settlement with the US Federal Trade Commission on Thursday, resolving a case over its Prime subscription sign-up and cancellation practices that Business Insider exposed in an exclusive investigation.
The settlement is the largest civil penalty in the FTC’s history.
BI’s 2022 report, based on internal Amazon documents, showed that the company had known since at least 2017 that its website design misled customers into joining Prime, the membership program that offers perks such as free delivery and video streaming.
Despite years of complaints, Amazon took little meaningful action, and in some cases, abandoned proposed fixes after internal tests showed slower subscription growth, according to Business Insider’s investigation. Following the story, the FTC revived a long-dormant probe, according to its earlier complaint.
“On March 14, 2022, Business Insider published information leaked from current and former Amazon employees regarding the problems with Amazon’s Prime checkout enrollment flow and the Iliad Flow,” the FTC wrote in a previous filing. “The Commission quickly ascertained that Amazon had failed to disclose much of the now-leaked documents and information to the Commission, despite the fact that at least some of it was responsive to the outstanding CID. Amazon withheld the information.”
As part of Thursday’s settlement, Amazon will pay a $1 billion penalty and refund consumers $1.5 billion, the FTC announced. The deal, reached three days after a Seattle jury was seated, bans Amazon and two executives from continuing the unlawful practices. It also requires Amazon to implement “meaningful changes” to its Prime enrollment and cancellation processes, ensuring transparent disclosures and streamlined procedures.
“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,” FTC Chairman Andrew Ferguson said in a statement.
An Amazon spokesperson told BI in an email that there was “no admission of guilt in this settlement by the company or any executives.”
“Amazon and our executives have always followed the law and this settlement allows us to move forward and focus on innovating for customers. We work incredibly hard to make it clear and simple for customers to both sign up or cancel their Prime membership, and to offer substantial value for our many millions of loyal Prime members around the world. We will continue to do so, and look forward to what we’ll deliver for Prime members in the coming years,” the spokesperson said.
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