Amazon has agreed to pay a hefty sum of $2.5 billion in fines and reimbursements to Prime subscribers as part of a settlement with the Federal Trade Commission (FTC) over allegations of unauthorized Prime subscription sign-ups. The FTC announced that $1.5 billion will be allocated to a fund to compensate approximately 35 million consumers who were affected by unwanted Prime memberships or delayed cancellations.
Although Amazon will not admit any wrongdoing, it has agreed to implement changes to improve transparency and user experience. These changes include adding a prominent button for customers to decline a Prime subscription, simplifying the cancellation process, providing clearer subscription terms during sign-up, and hiring an independent supervisor to ensure compliance.
The settlement comes shortly after the commencement of a trial in a Seattle federal court where the FTC presented evidence of Amazon’s questionable subscription practices. Internal Amazon documents revealed discussions among executives and employees regarding unethical enrollment methods, with remarks such as “subscription driving is a bit of a shady world” and likening unwanted subscriptions to “an unspoken cancer.”
FTC Chairman Andrew Ferguson highlighted that Amazon utilized sophisticated tactics to coerce consumers into Prime memberships and made it challenging for them to cancel. The investigation into Amazon’s subscription practices began during the Trump administration and culminated in this significant settlement during President Biden’s term.
Amazon Prime, a service offering benefits like expedited shipping, streaming services, and discounts, has garnered over 200 million American members. Originally introduced in 2005 at $79 annually in the U.S., the subscription now stands at $139 as of 2022. In Canada, the subscription fee increased to $99 plus taxes starting in 2022.
Amazon, under the leadership of CEO Andy Jassy, expressed relief at reaching the settlement, emphasizing its commitment to customer-centric practices. The company aims to streamline the Prime membership process and provide substantial value to its loyal members worldwide.
In a separate investigation in Canada, the Competition Bureau is scrutinizing Amazon’s Marketplace Fair Pricing Policy to determine if it violates the Competition Act by potentially influencing sellers to inflate prices on Amazon or restrict them from offering lower prices elsewhere. This probe follows a previous settlement in 2017 where Amazon was fined $1.1 million for misleading list prices on its platform.