Amazon hit with $2.5 billion penalty over Prime subscription 'traps'

Amazon will pay a combined $2.5 billion in penalties and consumer refunds after the Federal Trade Commission accused it of running what Chairman Andrew N. Ferguson called “sophisticated subscription traps.” The settlement marks one of the largest consumer protection cases in U.S. history and a rare civil penalty under the Restore Online Shoppers’ Confidence Act (ROSCA).

The agreement, filed in federal court in Washington, includes a $1 billion civil penalty—the largest ever for an FTC rule violation—and $1.5 billion in refunds to the estimated 35 million Prime customers allegedly misled or blocked from cancelling. Amazon must also overhaul its Prime sign-up and cancellation processes.

The FTC charged that Amazon used manipulative interface designs to nudge users into Prime memberships without informed consent. Internal documents revealed executives acknowledged the tactics, describing subscription growth as “a bit of a shady world” and calling the practices “an unspoken cancer.”

As part of the settlement, Amazon must now provide a clear “decline” option during Prime sign-up, display transparent information on costs and auto-renewal terms, and offer simple cancellation using the same method consumers used to enrol. The company is also required to hire an independent monitor to oversee compliance.