Amazon Prime Settlement With FTC Results in $2.5B Penalty

FTC has secured the largest civil penalty in its history, after finding Amazon violated federal consumer protection rules.

Amazon has been ordered to pay a $1 billion civil penalty and provide $1.5 billion in refunds to customers who were allegedly enrolled in its Prime membership program without consent.

According to a settlement order (PDF) reached between Amazon and the U.S. Federal Trade Commission (FTC) in the U.S District Court for the Western District of Washington on September 25, Amazon was found to have violated both the Federal Trade Commission Act and the Restore Online Shoppers’ Confidence Act (ROSCA), by collecting billing information before disclosing all Prime membership terms. 

The settlement also names two senior executives, Neil Lindsay and Jamil Ghani, who oversaw Prime’s enrollment and cancellation systems.

At the center of the case is Amazon’s Prime membership program, which provides free shipping, streaming services, and other benefits to more than 200 million subscribers worldwide.

In a complaint (PDF) filed in June 2023, the Federal Trade Commission accused Amazon of knowingly using manipulative design features, often called “dark patterns”, to trick consumers into enrolling in or automatically renewing Prime memberships without their consent. 

According to the FTC, Amazon’s checkout and account interfaces were intentionally structured to push users toward Prime enrollment, often by hiding the actual cost of membership, obscuring cancellation options, or using misleading language during the purchase process.

The complaint cites internal Amazon documents showing executives were aware that consumers found the sign-up and cancellation processes confusing but refused to make them clearer because doing so would reduce Prime subscription revenue. 

Rather than simplify the process, Amazon allegedly developed what it internally called the “Iliad Flow”, a multi-step, maze-like cancellation system named after Homer’s Iliad for its length and difficulty.

Consumers attempting to cancel Prime were forced to navigate multiple confirmation pages, misleading prompts and contradictory buttons before reaching the final cancellation option. The FTC claims this design was intentionally engineered to exhaust or frustrate users into keeping their memberships, violating the Restore Online Shoppers’ Confidence Act (ROSCA) and Section 5 of the FTC Act.

$2.5 Billion Settlement Orders Overhaul of Prime Practices

A press release issued by the FTC indicates that Amazon’s $1 billion civil penalty for violating agency rules is the largest ever obtained in such a case, while the $1.5 billion in relief for an estimated 35 million customers is the second-highest restitution ever recovered from an FTC action.

Amazon must pay the $1 billion civil penalty in two installments, with $500 million due within 14 days of the order and the remaining $500 million within 18 months. In addition, the company is required to deposit the $1.5 billion restitution fund into a consumer account within 30 days.

“The evidence showed that Amazon used sophisticated subscription traps designed to manipulate consumers into enrolling in Prime, and then made it exceedingly hard for consumers to end their subscription.”

— Andrew N. Ferguson, FTC Chairman

As part of the settlement, Amazon must overhaul its Prime enrollment and cancellation practices. The company is now required to clearly disclose the cost of membership, renewal terms, billing dates and cancellation procedures upfront, and to add a simple, conspicuous option for consumers to decline Prime without confusing language such as “No, I don’t want free shipping.” Cancellation must also be as easy as enrollment, using the same method and without added costs or obstacles.

To ensure compliance, a court-appointed Claims Supervisor will oversee the refund program, review disputed claims, and file quarterly compliance reports for 18 months. Amazon must provide full access to its records and pay all monitoring costs.

In addition, the injunction bars Amazon from using misleading sign-up or cancellation flows for the next 10 years, while the two executives named in the case face restrictions for three years.

Beyond the record penalties and business reforms, the order also provides direct compensation for affected consumers.

Customers who enrolled in Prime between June 2019 and June 2025, or who attempted to cancel but were unable to, may be eligible for refunds. Those who rarely used their memberships will automatically receive payments of up to $51, while others can submit claims for additional relief.

Sign up for more legal news that could affect you or your family.