Amazon has agreed to a $2.5 billion settlement with the Federal Trade Commission (FTC), which had taken the company to court over allegedly “deceptive” Prime membership sign-ups. The regulatory agency announced on Thursday that Amazon was accused of violating both the FTC Act and the Restore Online Shoppers’ Confidence Act (ROSCA). According to the terms of the settlement, Amazon will pay a $1 billion civil penalty and provide $1.5 billion in refunds to an estimated 35 million customers. If every one of those customers received an equal amount, they would be entitled to a refund of $42.86.
The deal was announced just as Amazon was on the third day of a jury trial in a federal court in Seattle. This marks a major victory for the FTC, yielding the largest civil penalty ever secured by the agency. A spokesperson for Amazon, Mark Blafkin, said that while the company did not admit or deny the allegations, it had “always followed the law” and that the settlement would allow the firm to “move forward.”
The Allegations and Agreement
In its suit, the FTC alleged that Amazon used deceptive practices to sign up customers for its signature Prime membership program and then made it excessively difficult to cancel those memberships. FTC Chairman Andrew Ferguson said that the evidence showed Amazon used “sophisticated subscription traps” and then made it “exceedingly hard for consumers to end their subscription.” He added, “Today, we are putting billions of dollars back into Americans’ pockets, and making sure Amazon never does this again.” The cancellation process was internally referred to as “Iliad,” a reference to the lengthy siege of Troy, as it required a customer to affirm their desire to cancel on three separate pages.
As part of the settlement, Amazon has agreed to make specific changes to its Prime membership sign-up and cancellation process. According to the FTC, Amazon must now include “a clear and conspicuous button for customers to decline Prime,” and “can no longer have a button that says, ‘No, I don’t want Free Shipping.'” The company also agreed to create a simple way to cancel Prime memberships and to pay for a third-party monitor to ensure compliance with the agreements and the refund distribution.
A Major Victory for the FTC
The lawsuit, which was originally brought in 2023, was filed under the Biden administration. However, FTC Chairman Andrew Ferguson was quick to credit the Trump administration for the large settlement, calling it a “record-breaking, monumental win.” The settlement is a fraction of the profits Amazon makes; in 2024, the company facilitated $638 billion in sales and earned a net income of $59.2 billion. Antitrust advocates like Nidhi Hegde of the American Economic Liberties Project criticized the settlement, saying it was not enough and that the FTC should have continued pushing for a new “Click-to-Cancel” rule that had been struck down by an appeals court earlier this year.
What The Author Thinks
This settlement is a significant warning to companies in the “subscription economy” that rely on deceptive practices to grow their user base. While the financial penalty is large, the greater impact is the public message it sends: that deceptive design and deliberately difficult cancellation processes will not be tolerated. This case sets a clear precedent that regulators are watching how companies acquire and retain customers, and that a “click-to-cancel” process may become the new standard. It suggests a future where companies will have to prioritize genuine value and user experience over manipulative design, which is a necessary step towards a more ethical and transparent digital marketplace.
Featured image credit: Wikimedia Commons
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