Amazon Reaches $2.5 Billion Settlement With the FTC Over Prime Case

Amazon has reached a $2.5 billion settlement with the FTC. (AFP via Getty Images)

Amazon.com has reached a settlement with the Federal Trade Commission over allegations that the e-commerce giant tricked customers into signing up for Prime accounts.

Amazon has agreed to pay $2.5 billion to settle the lawsuit that was filed by the FTC in June 2023, according to court filings. The lawsuit stated that Amazon used “deceptive” user-interface designs to unwillingly convince consumers into enrolling in renewing Prime subscriptions.

“Amazon and our executives have always followed the law and this settlement allows us to move forward and focus on innovating for customers,” Amazon spokesperson Mark Blafkin said in a statement on Thursday.

Amazon also told Barron’s that while the company remained confident that the facts and law were in its favor, it made sense to resolve this instead of going through weeks of trial and the risk of months or years of appeals.

The settlement not only requires that Amazon pay the $2.5 billion, but also makes sure that the company can no longer misrepresent the terms of a Prime subscription, requires Amazon to clearly disclose all of the terms of a Prime subscription, and must allow users to simply cancel their Prime memberships.

“Settlements can be strategic decisions for one or both parties: The settlement likely reflects the FTC’s belief that it gives them more than what they would have received from a judge—and/or a belief by Amazon that it requires giving up less than what the judge would have ordered. In this case, we more strongly believe the former,” Capital Alpha Partners analyst Robert Kaminski wrote on Thursday.

The FTC also sued Amazon in September 2023, alleging that the company is a monopolist that uses anticompetitive actions to “stop rivals and sellers from lowering prices, degrade quality for shoppers, overcharge sellers, stifle innovation, and prevent rivals from fairly competing.” That trial isn’t set to begin until February 2027.

Shares of Amazon were down 0.9% Thursday to $218.35.

Write to Angela Palumbo at angela.palumbo@dowjones.com