Amazon Settles FTC Case with $2.5 Billion Payout

• Amazon agrees to a $2.5 billion FTC settlement over misleading Prime sign-ups
• Deal includes $1.5 billion in refunds to 35 million customers
• Company avoids trial, agrees to stricter rules but admits no wrongdoing

Amazon has agreed to a $2.5 billion settlement with the Federal Trade Commission (FTC) to resolve allegations that it misled millions of customers into signing up for unwanted Prime memberships and made cancellation difficult.

The settlement includes $1 billion in civil penalties and $1.5 billion in customer refunds, covering around 35 million people. Affected users can expect up to $51 each within 90 days. The agreement was reached just days after the trial began in a Seattle court, helping Amazon avoid a prolonged legal battle and potentially larger fines.

According to the FTC, Amazon used 'dark patterns', design tactics that nudge users into making unintended choices, especially during the Prime sign-up and cancellation process. As part of the settlement, Amazon must now clearly disclose subscription terms, obtain explicit user consent, and make cancellation simple and transparent.

The order also restricts future conduct of two Amazon executives, Jamil Ghani and Neil Lindsay barring them from engaging in any unlawful practices related to subscriptions.

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Amazon, while not admitting guilt, said the settlement allows the company to move on. A spokesperson noted that many of the required changes were already in place. “We’re focused on continuing to improve customer experience and innovate”, the company stated.

This case marks one of the largest penalties in FTC history, second only to the $5 billion fine against Facebook in 2019. Still, for Amazon with a market cap nearing $2.4 trillion the financial impact is minimal. The company’s stock rose slightly after the news broke.