The Amazon Prime logo is displayed on the side of an Amazon delivery truck in Richmond, California, on June 21, 2023.
Justin Sullivan | Getty Images
Amazon will pay $2.5 billion to settle Federal Trade Commission allegations that it duped users into paying for Prime memberships, the regulatory agency announced Thursday.
The surprise settlement comes as Amazon and the FTC were just three days into the trial in a Seattle federal court. Opening arguments took place on Tuesday.
The lawsuit, filed by the FTC in June 2023 under the Biden administration, claimed that Amazon deceived tens of millions of customers into signing up for its Prime subscription program and sabotaged their attempts to cancel it. Three senior Amazon executives were at risk of being held individually liable if the jury sided with the FTC.
Amazon will pay a $1 billion civil penalty to the FTC and will refund $1.5 billion to an estimated 35 million customers who were impacted by “unwanted Prime enrollment or deferred cancellation,” the agency said.
The FTC said the agreement prohibits Amazon from misrepresenting the terms of Prime. It also requires the company to make clear and conspicuous disclosures about the terms of the program during enrollment, and it requires Amazon to get consumers’ express consent before charging them for a subscription. Amazon must also provide an easy way for users to cancel their subscription, the agency added.
As part of the agreement, Amazon and two of its executives, Prime boss Jamil Ghani and Neil Lindsay, a senior vice president in the company’s health division who previously held a role in the Prime business, will be prohibited from unlawful conduct.
FTC Chairman Andrew Ferguson called the penalty a “monumental win” for the agency under the Trump administration.
“The Trump-Vance FTC is committed to fighting back when companies try to cheat ordinary Americans out of their hard-earned pay,” he said in a statement.
Representatives for Amazon didn’t immediately respond to a request for comment.
The penalty is one of the largest ever imposed by the FTC. The agency in 2019 hit the company then known as Facebook with a $5 billion fine for violating consumers’ privacy.
Still, the $2.5 billion fine is equivalent to roughly 0.1% of Amazon’s market cap, which now sits at close to $2.4 trillion. Shares of Amazon were up slightly following the announcement.
Launched in 2005, Amazon’s Prime program has grown to become one of the most popular subscription services in the world, with more than 200 million members globally, and it has generated billions of dollars for the company. Membership costs $139 a year and includes perks like free shipping and access to streaming content. Data has shown that Prime members spend more and shop more often than non-Prime members.
This is breaking news. Please refresh for updates.
Source link
