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Amazon will pay $2.5 billion to settle allegations by the Federal Trade Commission (FTC) that it misled customers into enrolling in its Prime subscription program and made canceling the service unnecessarily difficult. The settlement, announced Thursday, includes a $1 billion civil penalty to the FTC and $1.5 billion in refunds to an estimated 35 million affected customers.

Settlement Details and Customer Refunds

Under the terms of the agreement, eligible customers will receive up to $51 each, with refunds expected to be distributed within 90 days. While Amazon admitted no wrongdoing, the settlement requires the company to clearly disclose Prime terms during enrollment, obtain explicit consent from consumers before charging, and ensure easy cancellation options are consistently available.

Two Amazon executives, Prime head Jamil Ghani and senior vice president Neil Lindsay, will also be prohibited from engaging in any unlawful practices related to the subscription service under the settlement.

Background of the FTC Case

The FTC filed the lawsuit in June 2023, alleging that Amazon’s deceptive sign-up and cancellation procedures defrauded tens of millions of customers. Three senior Amazon executives had been at risk of individual liability if the case had gone to a jury trial, which began in Seattle federal court earlier this week. The settlement halts the trial, avoiding potentially higher damages.

Amazon spokesperson Mark Blafkin emphasized that the company has “always followed the law” and said the settlement allows Amazon to focus on customer innovation. Many of the FTC’s requested changes, Amazon noted, had already been implemented years ago.

Prime Program Overview

Launched in 2005, Amazon Prime has grown into one of the world’s largest subscription services, with more than 200 million members globally. Annual membership costs $139 in the U.S. and includes perks such as free shipping and streaming services. Data consistently shows that Prime members spend more frequently and at higher rates than non-members, making the program a major revenue driver for Amazon.

Broader Legal and Market Implications

The $2.5 billion settlement ranks among the largest FTC penalties ever, though it represents only about 0.1% of Amazon’s $2.4 trillion market capitalization. In comparison, Meta was fined $5 billion in 2019 for consumer privacy violations. Following the announcement, Amazon shares rose slightly in trading.

Despite resolving this Prime-related dispute, Amazon faces ongoing legal challenges with the FTC. In 2023, the regulator, joined by attorneys general from 17 states, accused Amazon of leveraging monopoly power to inflate prices, degrade quality, and block competitors, threatening fair market competition. The company is expected to go to trial on these antitrust claims in 2027.

FTC Perspective

FTC Chairman Andrew Ferguson called the settlement a “monumental win” for consumer protection. He emphasized the agency’s commitment to ensuring companies cannot exploit customers through misleading subscription practices.

Amazon’s agreement ensures that Prime members will have full transparency regarding enrollment, billing, and cancellation processes moving forward, reinforcing consumer rights while allowing the company to continue scaling one of its most profitable services.