Amazon Agrees to $2.5B Settlement With FTC Over ‘Deceptive’ Prime Program

Amazon.com will pay $2.5 billion to settle Federal Trade Commission (FTC) allegations that the company duped users into paying for Prime memberships, the regulatory agency announced last week. The surprise settlement comes as Amazon and the FTC were just three days into the trial in a Seattle federal court. Opening arguments in the case occurred Tuesday, but the settlement allows Amazon to avoid having a jury at the trial return a verdict with potentially larger damages than the settlement with the FTC. The lawsuit claimed that Amazon deceived tens of millions of customers into signing up for its Prime subscription program and sabotaged their attempts to cancel it.

Total Retail's Take: It appears that Amazon was willing to accept the settlement deal out of fear that a trial jury could impose even more severe damages. While Amazon admitted no wrongdoing in the settlement, the company will refund $1.5 billion to an estimated 35 million customers impacted by “unwanted Prime enrollment or deferred cancellation,” the FTC said. In its zealousness to add more Prime members — who have proven to shop more and spend more with Amazon — the online retail giant was accused of misrepresenting the terms of its paid loyalty program, including clear and conspicuous disclosures about the terms of the program during enrollment, obtaining consumers’ express consent before charging them for a subscription, and providing an easy way for users to cancel their subscription. In an era when transparent communication is critical to securing customer loyalty, Amazon paid a hefty price to be reminded of that lesson.