Amazon.com Inc. has agreed to a $2.5 billion settlement. This settlement is meant to settle claims by the Federal Trade Commission (FTC) that the company deceived subscribers into subscribing for its Prime membership. The settlement, once distributed, will result in $1 billion in civil penalties and $1.5 billion in consumer refunds to affected consumers. This resolution comes two years after the FTC initially brought the case. It shines a light on the various violations of the Restore Online Shoppers’ Confidence Act, a law first passed in 2010 to increase transparency and fairness in online shopping processes.
The FTC’s complaint centers around claims that Amazon failed to adequately inform customers about the charges associated with Prime membership, leading many to enroll unintentionally. As part of the settlement, Amazon will not acknowledge any wrongdoing. It will bring new industry-wide measures to make information clearer for consumers about its subscription services.
According to the FTC, Amazon customers typically navigate through a multi-step process requiring affirmation on three separate pages to cancel their Prime memberships. This complexity has been a magnet for criticism, with critics charging that the added complexity can cloud customers’ choices.
“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.” – Chris Mufarrige, director of the Bureau of Consumer Protection
As the settlement requires, Amazon defaults Prime customers to receive automatic refunds of up to $51. Not everyone who signs up through Amazon’s “Single Page Checkout” will be eligible. This only works for members who joined from 6/23/2019 – 6/23/2025. Consumer refunds to be paid within 90 days of order for settlement.
In its most recent quarterly report, Amazon disclosed that it earned $12 billion in net revenue from subscription services. That figure represents an astounding 12% jump over the same time period last year. This large figure covers only the annual and monthly fees for Prime memberships. It includes revenues from all other subscription services, such as music and e-book subscription platforms.
Amazon’s spokesman Mark Blafkin emphasized the company’s commitment to compliance with legal standards.
“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.” – Mark Blafkin, Amazon spokesman
The FTC’s recent enforcement actions are an indication of the agency’s continued focus on protecting consumers as the e-commerce market continues to expand at lightning speed. The agency has recently focused more scrutiny on online business practices, especially a lack of transparency and fairness regarding customers’ transactions with businesses.
Under this settlement, Amazon must prioritize providing refunds to customers who were impacted. The company plans to significantly improve their consumer protection efforts in the future. The company aims to streamline its processes and improve customer education regarding subscription terms, thereby reducing potential confusion for future subscribers.
