In a jaw-dropping twist, Amazon is facing down a staggering $2.5 billion settlement with the Federal Trade Commission (FTC) over accusations that it duped customers into Prime memberships and then made it nearly impossible to cancel. This marks the largest civil penalty in the FTC's history for a rule violation!

The Seattle tech giant will fork over $1 billion in civil penalties and reimburse $1.5 billion to consumers who unknowingly signed up for Prime or were misled into avoiding cancellation. This unexpected resolution came just days after the trial kicked off in U.S. District Court.

At the heart of the case is the Restore Online Shoppers’ Confidence Act, a 2010 law aimed at ensuring transparency for online purchases. FTC officials indicated that Amazon found itself in a tight spot, with the consumer refund amount surpassing the agency's own predictions. Chris Mufarrige, director of the Bureau of Consumer Protection, commented on the settlement negotiations, saying, “I think it just took a few days for them to see that they were going to lose.”

Although Amazon claimed confidence in its case, it opted for a fast resolution rather than dragging through years of legal battles. The company continued to assert that it did no wrong, stating, “Amazon and our executives have always followed the law and this settlement allows us to move forward.” But what does this mean for customers?

Eligible Prime customers might receive automatic refunds of up to $51, particularly those who signed up through what’s called the “Single Page Checkout” between June 23, 2019, and June 23, 2025. They can expect their reimbursements within 90 days of the settlement order.

Additionally, Amazon now needs to implement a claims process for over 30 million customers impacted by the FTC's allegations regarding its cancellation practices. With more than 200 million Prime members worldwide, the implications of this settlement could shake up how Amazon conducts business.

While Prime members enjoy perks ranging from expedited shipping to video streaming for an annual fee of $139, the FTC accused Amazon of intentionally complicating the purchasing process to enforce Prime subscriptions. Customers often encountered buttons that didn’t clearly indicate they would also enroll them in Prime.

Canceling a subscription was notoriously challenging, with internal documents revealing that Amazon’s leadership delayed or rejected changes to simplify the cancellation process, referred to internally as “Iliad,” likening it to the ancient Greek saga of the protracted siege of Troy.

This FTC investigation into Amazon’s practices began back in 2021 during the Trump administration, but the lawsuit was formally filed in 2023 under the leadership of former Chair Lina Khan, known for her antitrust expertise. The FTC's move against Amazon came just months before it launched another antitrust suit against the retail titan, alleging monopolistic control over online markets.

In 2019, Facebook (now Meta) was slapped with a $5 billion fine for privacy violations, but Amazon's settlement is a record-breaking penalty for the FTC. As part of the settlement, Amazon must stop misrepresenting subscription terms, clearly state costs, and ensure that cancellation processes are straightforward and user-friendly. The company insists that the settlement does not require it to alter its existing sign-up and cancellation protocols.