The Federal Trade Commission accused Amazon of using “deceitful” tactics to sign customers on prime subscriptions that are difficult to cancel.
Amazon will refund millions with $2.5 billion in prime payment
Amazon will refund millions after resolving an FTC lawsuit over Prime subscription and cancellation issues.
Amazon has agreed to pay what the Federal Trade Commission (FTC) calls a “historic” $2.5 billion settlement after it was accused of manipulating the acquisition and retention of a prime subscription.
The FTC filed an antitrust law against retail giants in June 2023, claiming that they had signed up for millions of consumers on Prime subscriptions without their consent, making it extremely difficult to cancel their subscription.
At the time, Amazon called evidence from the lawsuit that the FTC “dramatically left its mission to protect consumers and competition.”
However, the company resolved the case just as the Seattle trial began.
Amazon knew about “Shady” practice: lawsuits
The FTC in the press release said it was led to trial, and investigators found documents indicating that Amazon executives and employees were aware of issues with the Prime registration and cancellation process.
Former Amazon User Experience researcher Reid Nelson testified in court on September 24th, reporting that NPR reportedly flagged Amazon tactics and interfaces as “misleading” and “confusing.” Amazon claimed that subscription and cancellation practices exceeded industry transparency standards, with millions of people improving the customer experience, according to NPR.
“Amazon has shown that it has made it extremely difficult for consumers to terminate their subscriptions with Prime,” FTC Chairman Andrew Ferguson said in a statement. “Today, we’re bringing billions of dollars back into Americans’ pockets and making sure Amazon never does this again.”
The FTC is pursuing similar lawsuits against other major companies, Federal Communications Commission’s Brendan Carr said that Fox Business Network called “my key priorities” in a money-making interview with Charles Payne.
Amazon agrees to pay customers $1.5 billion
As part of the settlement agreement, Amazon did not admit any fraud, but agreed to comply with some changes to the interface.
These include making sure that customers have a clear and prominent button to reject Prime and removing the “No, I don’t want free shipping.” Provides clear and prominent disclosure of prime terms, including costs, fees and cancellation procedures. Create an easy way for consumers to cancel Prime using the same methods that consumers can sign up and independent third-party supervisors monitor compliance. ”
Amazon has also agreed to $1 billion in civil penalties and $1.5 billion in consumer relief for approximately 35 million affected customers. According to court documents, some eligible customers will automatically receive a relief of up to $51, while others will have to file a claim.
“Amazon and our executives have always followed the law, and this settlement allows us to move forward and focus on innovation for our customers,” senior manager of Amazon’s policy newsletter Mark Blafkinside said in a statement. “We are working very hard to make it clear and simple that our customers sign up or cancel key memberships and provide significant value to millions of loyal key members around the world.”
Reaction to reconciliation
The American Economic Freedom Project, which opposes a concentration of business power, said the settlement would allow Amazon and its executives to “leave Scott Free.”
“This game from this mall is enough. If the committee is serious about protecting people from a deceptive subscription scheme, they will need to reissue the click-to-cancellation rule rather than throwing it aside to appease the Chamber of Commerce.”
In a post on X, Alvaro Bedoya, a senior adviser to the American Economic Freedom Project and former FTC commissioner under the Biden administration, questioned why the FTC leadership accepted the settlement after winning a string of victory in court.
“We have to ask ourselves. What pressure did the White House put on this FTC to enter this settlement? What communication did this have? This didn’t smell right.”
Former FTC chair Lina Khan shared the Bedya post, adding that the settlement “supposes a real question.”
Still, Technology Trade Group NetChoice said the Trump administration is taking the “right step” by solving the case.
“It’s good to see the Trump administration come to the table to resolve conflicts with major American technology companies, rather than engage in counterproductive outcomes for consumers and counterproductive outcomes with America’s ability to innovation and compete.”
Teresa Murray, the consumer watchdog director for the Public Interest Research Group, called the settlement “Great News.”
“It surpasses Amazon and Amazon Prime customers,” Murray said. “This could help all consumers. This could be tricked by a subscription, be fooled about signing up, or signed up for some sort of subscription or membership in the future.”
What is the status of the Click-toCancel rule?
The Amazon case is behind the push from consumer advocates and regulatory authorities, establishing an easy way to cancel subscriptions to streaming services, gym memberships, food delivery and more. The court blocked the “click to cancel” rule in July and was scheduled to take effect afterwards.
The rules, proposed as part of former President Joe Biden’s efforts to crack down on “junk charges,” would have required businesses to agree to a free trial that would convert them into subscriptions, auto-renewal and paid memberships. The FTC said canceling services should be “at least easy” as signing up.
Almost 75% of companies selling directly to customers offer some kind of subscription, according to industry and background notes co-authored by Harvard Business School Marketing professor Elieek.
Complaints about the difficulty of deleting subscriptions have skyrocketed in recent years, with some customers paying monthly once they don’t want or no longer need the product or service.
Meanwhile, trade groups representing advertisers, news publishers, retailers and other industries argued that a multi-stage cancellation process would protect consumers or allow better deals to be used.
Murray of Pirg said the organization hopes the FTC will revive the click-to-cancellation rule.
“When you feel like you can’t trust who the consumer is dealing with, they hurt too,” Murray said. “In the meantime, we hope that this Amazon settlement will send a strong message to businesses operating in a way that can disrupt customers or prevent them from becoming customers.”
In an interview with Fox Business, Carr said he was considering whether the FTC would further cover the creation of rules from click to cancellation, adding that he would not agree with the previous administration’s approach to setting rules.
Ferguson, the current FTC chair, said he voted against Biden’s “click to cancel” rule.
How to cancel your subscription
PIRG recommends these strategies if you have issues canceling your subscription.
- Think carefully about that free trial subscription.
- Do not use a debit card. Always use your credit card.
- Please read the terms of use and pay attention to the boxes that were checked in advance.
- Keep a copy of the email or text message sent when you signed up, a screenshot of your cancellation efforts, or a note from your phone that includes the name of the person you spoke to.
- Put a reminder in the calendar. For a one-year subscription, schedule a calendar reminder several weeks and days before the automatic renewal date and then cancel. Please don’t wait until the end.
- If possible, remove your credit card information from your account to prevent you from being charged for another billing cycle.
- If you have issues with cancellation, complain to the FTC and the state attorney general.
