Amazon has agreed to pay $2.5 billion to settle claims that it misled tens of millions of people into signing up for its Prime membership program and then made it difficult for customers to cancel.
The settlement was announced on Thursday, just days into a jury trial in Seattle that began earlier this week.
Breakdown Of Settlement
The $2.5 billion settlement includes $1 billion in penalties and $1.5 billion in payouts to customers. Those who qualify could receive around $51 each, as per New York Times report.
While Amazon agreed to the settlement, the company did not admit or deny any wrongdoing.
Background Of Lawsuit
The lawsuit was filed by the Federal Trade Commission (FTC) in 2023. It claimed that Amazon used confusing processes and deceptive tactics to sign people up for Prime and make it difficult to leave.
The case targeted the way Amazon manages its subscription service, which is used by roughly 200 million people in the US.
Prime subscriptions are a major part of Amazon’s business, bringing in more than $44 billion last year. Beyond fees, Prime members are highly valuable to Amazon because they buy more often and spend more than non-members.
FTC’s Role
FTC Chairman Andrew Ferguson has criticized big tech companies for harming consumers and competition. Under this settlement, Amazon must ensure customers are refunded within 90 days if they qualify.
Eligible customers include those who enrolled in Prime but barely used benefits like video streaming.
Amazon will also notify other customers who believe they were unintentionally enrolled or prevented from canceling. These customers can submit a claim to receive compensation.