FTC lands historic $2.5 billion settlement with Amazon

PHOENIX – The largest Federal Trade Commission penalty ever has been levied, and Amazon has to pay it.

What we know:

The FTC settled with Amazon for a total of $2.5 billion for using deceptive practices centered around its Prime subscription. They allege that the company tricked people into signing up for Prime, and are now sending a strong message to all subscription services. 

“This is a massive historic victory delivered for the American people,” said FTC Chair Andrew N. Ferguson in an interview with Fox Business.

Ferguson told Fox Business that after years of investigation, Amazon was using “sophisticated subscription traps” designed to manipulate consumers into enrolling in Prime, and then made it exceedingly hard for them to end their subscription.

“You wanted to see them as a transparent company, but now, it’s disheartening. It’s like who do you trust?” one person said.

Local perspective:

Phoenix-based e-commerce attorney Courtney Abrams, with Abrams Law, studied the case. 

“These executives slowed, avoided and even undid user experience changes,” she said. 

When asked why one of the largest companies in history would need to trick an estimated 35 million people, Abrams said, “Greed, potentially. They make about $25 billion in annual revenue so this really does help their bottom line.”

Abrams said in the suit, Amazon executives were very aware of what they were doing.

“They referred to the cancellation process as ‘Project Illiad’ after Homer’s lengthy novel,” Abrams said. “It would involve several screens asking questions designed just to wear people out and give up in the cancellation process.”

Dig deeper:

“You try to look for that unsubscribe at the bottom of like any email from anything, its so small and then when you do find it there’s so many questions to it,” another person said.

The settlement stipulates that Amazon needs to provide a clear decline button for Prime, and cancellation must be clear and accessible.

“Look, we’re in litigation against a bunch of big companies on this exact issue,” Ferguson said. “I’ve taken Uber to court, I’ve taken LA Fitness to court on this issue. And so we have taken some of the biggest companies in America to court and we’re not backing down. This has become one of my biggest issues since becoming FTC chair in January and its going to continue to be.”

Amazon has 90 days to notify customers they’re entitled to a $51 refund, which may not sound like much, but sets a precedent for all subscription-based services.

“In the broader picture, it is sending a message to tech companies that this type of behavior is not acceptable,” Abrams said.

What they’re saying:

In a statement, Amazon spokesperson Mark Blafkin said the company and its 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 for or cancel their Prime membership, and to offer substantial value for our many millions of loyal Prime members around the world,” he added. “We will continue to do so, and look forward to what we deliver for Prime members in the coming years.”

What you can do:

If you were duped, you’ll get an automatic refund. If you think you deserve more, you need to file a claim form. Going forward, consumers are advised to read the fine print before clicking ‘OK.’

The window for eligibility is June 23, 2019 to June 23, 2025. If you signed up for Prime during that window under flows the FTC says were deceptive, you may be eligible.

For customers who used three or fewer Prime benefits (e.g. video, shipping, etc.) in a year, refunds of $51 will be issued automatically. Others who used more benefits may need to file a claim form to receive their portion of the refund pool. 

Amazon is required to notify eligible consumers (by email, mail, website notices) and set up a claims portal. The refunds are to be distributed within 90 days of the settlement order.