Amazon has reached a historic $2.5bn (£1.9bn) settlement with a US business watchdog over allegations it tricked customers into signing up for Prime membership.
The Federal Trade Commission (FTC) accused the online giant of tricking customers into the membership scheme – which includes perks like faster delivery – and then making it difficult to cancel.
The Seattle-based company will pay $1bn (£750m) in civil penalties, and $1.5bn (£1.1bn) paid back to customers unintentionally enrolled in Prime or deterred from cancelling their subscriptions.
Around 35 million Prime customers will be eligible for a payout from the $1.5bn (£1.1bn) fund, the FTC said.
Customers who signed up for Prime between 23 June, 2019, and 23 June, 2025, through certain offers, and used few Prime benefits afterwards, will automatically receive $51 (£38).
The FTC accused Amazon of making it deliberately difficult for customers to purchase an item without also subscribing to Prime.
It added that customers were, in some cases, presented with a button to complete their transactions, which did not clearly state that it would enrol them into Prime.
Amazon did not admit any wrongdoing. Pic: Reuters
Getting out of a subscription was often too complicated, and Amazon slowed or rejected changes that would have made cancelling easier, according to an FTC complaint.
The process of unsubscribing, requiring customers to affirm on three pages their desire to quit, was referred to internally as “Iliad”, an ancient Greek epic by Homer about the Trojan War, according to the watchdog’s complaint.
The settlement came just days after a trial began in Seattle this week.
Chris Mufarrige, director of the Bureau of Consumer Protection, said: “I think it just took a few days for them to see that they were going to lose. And they came to us and they paid out.”
Amazon, which admitted no wrongdoing in the case filed two years ago, said it was confident it would win the case but chose to resolve it quickly rather than going through potentially years of trial and appeal.
Prime benefits include faster delivery. Pic: Reuters
Amazon spokesman, Mark Blafkin, said: “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.”
Under the settlement, Amazon is prohibited from misrepresenting the terms of the subscriptions.
It must fully disclose the costs to be incurred and obtain the customer’s express consent for the charge, with a clear option for customers to accept or decline a Prime subscription offered during purchase and avoid language deemed confusing, such as: “No thanks, I don’t want free shipping.”
Amazon said the settlement does not require it to make any additional changes, only to maintain its current sign-up and cancellation process that it had put in place for a year.
