Amazon to pay $2.5 billion to settle legal case over misleading Prime subscriptions

Amazon has agreed to make a one-off $2.5 billion payment to settle the U.S. court case in which the online retail giant was accused of deceiving tens of millions of consumers into subscribing to its Prime service.

Under the agreement reached between Amazon and the U.S. consumer protection authority (FTC), the Seattle-based company will pay $1.5 billion to compensate affected subscribers, while a further $1 billion will be paid to the US Treasury as a penalty.

“Today, the FTC (…) has won a monumental and unprecedented victory for the millions of Americans weary of deceptive subscriptions that seem impossible to cancel,” said FTC Commissioner Andrew N. Ferguson in a statement.

“Amazon and our executives have always respected the law, and this agreement allows us to move forward and focus on innovation to serve our customers,” the company said in a statement, which, through this agreement, avoids a conviction or any admission of the allegations.

In 2024, Amazon was the leading fashion retailer in the United States, capturing 16.2% of the U.S. apparel market. A category that, along with high-tech, is among the marketplace’s flagship offerings. In France, Amazon is the third-biggest clothing retailer by volume, across all channels, behind Vinted and Kiabi, according to the new consumer barometer from the Institut Français de la Mode.

“Dark patterns” to fool customers

This case is part of a series of recent lawsuits brought in the U.S. under both Democratic and Republican administrations to curb the unchecked dominance of several major technology companies, such as Google and Apple, after years of governmental leniency. With regard to Prime, the FTC brought this action in 2023, accusing Amazon of knowingly deploying manipulative interfaces, known as “dark patterns”, so that, at the point of purchase, consumers would also subscribe to the Prime service for $139 per year.

This paid subscription offers a number of additional services, including free, fast delivery, discounts in certain supermarkets and access to Amazon’s video platform. The company faced two main allegations: that it gained subscribers without their explicit consent, by making it very difficult to click the right buttons to refuse the subscription, and that it created a deliberately complex cancellation system, internally nicknamed “Iliad”, after Homer’s poem about the long and difficult Trojan War.

Amazon promises change

Amazon was also accused of charging its customers before disclosing the full terms and conditions of the subscription. The case began on Monday with a jury trial in federal court in Seattle, presided over by Judge John Chun. Judge Chun is also overseeing another case brought by the FTC against Amazon, this time alleging an illegal monopoly. This other case will go to trial in 2027.

Under the terms of the agreement reached on Thursday, Amazon has committed to obtaining explicit consent before any subscription or charge, and to simplifying cancellation procedures, under a protocol it must follow for ten years. Amazon has consistently disputed the allegations, saying it has improved its sign-up and cancellation processes. Last week, Judge Chun also found that Amazon had violated an online shopper protection law by collecting billing data from Prime subscribers before explaining the terms of use.

The FTC based its case in part on the ROSCA Act, which came into force in 2010 and prohibits charging for online services that are activated by default, without clearly stating the terms, without obtaining explicit customer consent, and without providing simple cancellation procedures.

(with AFP)