Amazon to pay $2.5 billion in settlement over 'Prime trap' charge. Case explained

Ending a two-year-old dispute over allegations that it tricked consumers into buying the Prime subscription and then made it hard to cancel, e-commerce and OTT giant Amazon has agreedto pay a historic $2.5 billion in settlement with the Federal Trade Commission. Under the agreement, $1 billion will be paid in civil penalty and $1.5 billion in refunds to an estimated 35 million customers.

What's the case against Amazon about?

The agency said in a statement that these consumerswere harmed by Amazon through deceptive Prime enrollment practices. The lawsuit over the company's cancellation policies was filed in 2023.

FTC Chairman Andrew Ferguson called the settlement a monumental win for the millions of Americans who are tired of deceptive subscriptions that feel impossible to cancel.

He said Amazon used sophisticated subscription traps designed to manipulate consumers into enrolling in Prime. He said it made it exceedingly hard for consumers to end their subscription.

Amazon spokesperson Mark Blafkin, however, said in a statement that they had always followed the law.

"Amazon and our executives have always followed the law, and this settlement allows us to move forward and focus on innovating for customers. We work incredibly hard to make it clear and simple for customers to both sign up or cancel their Prime membership, and to offer substantial value for our many millions of loyal Prime members around the world," he added.

The firm, however, didn't admit to wrongdoing.

Amazon can no longerhave the “No, I don’t want Free Shipping” button.

Analysts say that the settlement might streamline Prime’s cancellation process, but it won’t dent the program’s dominance.

Former FTC chair Lina Khan said that the amount was a drop in Amazon's bucket. It added that it was also a relief to Amazon executives who harmed their customers.