Amazon’s $2.5 – Billion Settlement with the Federal Trade Commission

I. Lawsuit Allegations

Amazon has reached an agreement to pay $2.5 billion to settle a lawsuit brought by the Federal Trade Commission (FTC). The FTC alleged that Amazon “knowingly duped” millions of individuals into enrolling in its Amazon Prime membership program through the use of “dark patterns,” which are defined as “manipulative, coercive, or deceptive user – interface designs.”

The settlement further claimed that Amazon violated the Restore Online Shoppers’ Confidence Act (ROSCA) of 2010. ROSCA was enacted to prevent the use of deception to prompt or encourage online purchases. Amazon, according to the claim, obtained consumers’ billing information prior to disclosing all material terms for an Amazon Prime subscription.

II. Settlement Details

1. Financial Breakdown
   – The $2.5 – billion payment consists of two parts. $1 billion is to be paid to the FTC, and $1.5 billion will be directly allocated to consumers. These consumers either unknowingly signed up for Prime or attempted to cancel their Prime subscriptions but failed due to Amazon’s online interface between June 23, 2019, and June 23, 2025. Individual consumers may receive compensation of up to $51 each.
2. Implementation Timeline
   – As per the settlement terms, within 30 days, Amazon must deposit $1.5 billion into a fund earmarked for reimbursing eligible consumers. Additionally, the company is required to make two $500 – million payments to the FTC. The first payment is due within 14 days, and the second within 18 months.
3. Eligible Consumers
   – In the six – year period set by the settlement, those who “unsuccessfully attempted” to cancel their Prime subscription online are eligible for up to $51 from Amazon. Consumers who signed up for Prime during the same period through a “challenged enrollment flow” (a page with a confusing interface potentially leading to inadvertent purchases) can also receive up to $51. For instance, some users may have selected “two – day shipping” on an item without realizing they were simultaneously signing up for Amazon Prime.
4. Compensation Process
   – An FTC spokesperson informed WIRED that automatic payments will be made to some customers within 90 days. The remaining eligible consumers will receive a notification from Amazon. They will then have the opportunity to submit a simple claim form. Amazon is obliged to post information regarding this on Amazon.com and its app. Moreover, the settlement mandates Amazon to engage an independent third – party to monitor its compliance with these claims.

III. Prohibited Practices

1. Negative Option Feature
   – The court filing permanently bars Amazon from structuring Prime sign – ups with a confusing “negative option feature.” In such a feature, a customer is assumed to be making a purchase unless they actively refuse it. For example, a button labeled “No thanks, I don’t want free shipping” does not clearly convey that a customer will be signed up for Prime unless they click it.
2. User Interface Clarity
   – Amazon is required to make it evident when a person is choosing to sign up for Prime. Its user interface should include language like “Join Prime.” Similarly, when a Prime subscription is subject to auto – renewals, Amazon must clearly communicate this using words like “renew.”

IV. Initial Complaint and Internal Communications

1. Initial Complaint
   – The FTC filed the initial complaint in June 2023, alleging that although Amazon had improved its Prime membership cancellation process, it had, for years, knowingly made the cancellation process more complex.
2. Internal Emails and Presentations
   – An attachment in a May 7 court filing contains an email chain from December 2020 among Amazon employees, marked “privileged and confidential” in the subject line. In the email, a manager of Prime content and marketing paraphrased key points from a recent “US prime performance meeting.” Quotes such as “Subscription is driving a bit of a shady world” and “We should lean away from experimenting with sign – up clarity, and focus more on driving overall members and increasing confirmation that you are prime” were included.
   – Another attachment, an Amazon slide presentation dated September 17, 2017, focused on customer service complaints regarding “unintentional” Prime sign – ups. A related email chain dated September 25, 2017, requested two dozen people to “delete the PowerPoint document” and send “confirmation” upon doing so. Customer complaints in the presentation included claims of being “tricked” into signing up for a free Prime trial when selecting two – day shipping, and statements like “I DO NOT LIKE YOUR SERVICE,” “THIS IS CRAP THAT I ORDERED A PRODUCT IN AMAZON ADS [sic] ME TO A PROGRAM WITH AUTO BILLING THAT I DID NOT SIGN UP FOR,” and “IT IS SNEAKY AND BLOODY DISHONEST FORCING SOMETHING THE [sic] I NEVER WANTED.” The presentation also noted that confusing Prime sign – ups led to an increased burden on customer service workers and a “loss of customer trust.”

V. Amazon’s Stance

1. No Admission of Guilt
   – Amazon spokesperson Alisa Carroll informed WIRED that neither the company nor any of its executives admitted guilt in this settlement.
2. Reason for Settlement
   – Carroll stated that Amazon settled to avoid the risk of “months or years of appeals.” She also mentioned that the settlement largely requires Amazon to maintain the sign – up and cancellation process that has been in place for several years, without making additional changes, and that the company will continue to comply with the law.

VI. Broader Context of Dark Patterns

Dark patterns are not unique to Amazon. Countless websites have privacy settings that make it confusing for users to reject data – sharing and the use of cookies. Many fashion sites claim low stock for items of interest without clear evidence of the claim’s veracity. Google has been accused of using “dark patterns” by making it difficult to distinguish between organic and paid search results. The $2.5 – billion settlement with Amazon represents a significant step in compensating consumers for purchases made under such deceptive conditions. Although the exact number of American Amazon Prime subscribers is unclear, in 2021, company founder Jeff Bezos stated that it had over 200 million subscribers globally.