Amazon agreed Thursday to pay $2.5 billion to settle Federal Trade Commission claims the company tricked customers into $139 Prime memberships.
The settlement, which includes $1.5 billion in refunds, came three days into a trial in a federal court in Seattle that was expected to last about a month.
The FTC, which filed the lawsuit during the Biden administration, accused Amazon of duping millions of Amazon customers into signing up for the company’s subscription service and making it complicated to cancel.
As part of the settlement, Amazon will pay a $1 billion civil penalty in addition to the refund to about 35 million customers who were “harmed by their deceptive Prime enrollment practices,” the agency said in a news release. Eligible customers will receive $51 from the company within 90 days. The overall penalty is one of the largest paid in an FTC case.
Amazon will also be required to “clearly and conspicuously” disclose the terms of Prime memberships and make them easier to cancel.
Amazon said Thursday that many of the changes outlined by the FTC were made years ago and that it won’t have to make additional changes. One of the defenses put forward by Amazon’s lawyers in opening statements Tuesday was that the FTC hasn’t been clear how Amazon could satisfy federal requirements.
FTC Chair Andrew N. Ferguson described the settlement as a “monumental win” for the Trump administration’s FTC.
In a statement, Amazon spokesperson Mark Blafkin said the company and its leaders “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,” Blafkin continued.
Two executives, Prime leaders Jamil Ghani and Neil Lindsay, were also named as defendants in the case and would have been held personally liable if the jury sided with the FTC. A third Amazon executive, Russell Grandinetti, may have faced personal liability as well. As part of the settlement, none of the executives faced civil penalties.
Prime, launched in 2005, is one of the pillars of Amazon. The service, with an estimated 200 million users, not only brings in an annual $139 per person but the company’s lawyers provided evidence during the trial that show much of Amazon’s retail revenue comes from Prime members. They overwhelmingly do the most shopping on the marketplace.
The settlement, touted as “record-breaking” and “historic” by the FTC, served as an appetizer for hungry antitrust advocates, as the company faces a larger case from the regulatory agency.
The FTC filed an antitrust suit against Amazon in 2023, accusing the company of illegally squashing e-commerce competition on its way to dominating the market. The agency, flanked by attorneys generals from 17 states, claimed Amazon manipulated prices among its third-party sellers.
The case is expected to go to trial in 2027, though Amazon has already won a partial dismissal.
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