Turning Point for Amazon: Record Fine in the Billions

In a unique comparison, Amazon has reached a settlement with the United States Federal Trade Commission (FTC) that will go down in history. The online retail giant will settle for a sum of $2.5 billion after being accused of misleading customers into Prime memberships. One billion dollars will be due as a civil penalty—the highest amount ever imposed by the FTC—while $1.5 billion will be refunded to affected customers. These customers either unknowingly signed up for a Prime membership or experienced difficulties in canceling. The settlement comes shortly after the trial began in a U.S. court in Seattle and revolves around the Consumer Protection Act of 2010. According to the FTC, the decision was made not least because Amazon was “with its back against the wall.” The settlement included significantly higher refunds to customers than the agency's experts had expected. Although Amazon appeared confident of victory, the company decided not to prolong the litigation unnecessarily and emphasized not admitting any wrongdoing. Amazon spokesperson Mark Blafkin stressed that the company always acts in compliance with the law, and the settlement allows them to focus on innovations for customers. Automatic refunds are provided for certain Prime customers. These include those who will experience significant relief in their sign-up process, including the elimination of confusing elements in the page design. Amazon Prime, which now has over 200 million members worldwide, remains a central part of the company. With an annual fee of $139, it offers its members benefits such as faster deliveries or discounts at Whole Foods. In its latest report, Amazon was able to record revenues from subscriptions, which include Prime, of more than $12 billion, an increase of 12 percent compared to the previous year. The FTC criticized Amazon's practices of virtually pressuring customers into membership by making the purchasing process confusing. Many customers had difficulty canceling their subscriptions, which was jokingly referred to internally at Amazon under the codename "Iliad" as an epic effort. The case was pursued over the past two years under the leadership of FTC Chair Lina Khan and culminated in this historic settlement. Amazon is now obligated to establish more transparent processes and implement a comprehensible cancellation system.