Millions of Amazon Prime Customers Will Get Part of $1.5 Billion Lawsuit Settlement

Last month, for example, it sued the operators of LA Fitness and other gyms, alleging that, like Amazon, they made it “exceedingly difficult” for consumers to cancel their memberships.

“Tens of thousands of LA Fitness customers reported difficulties — cancellation was often restricted to specific times or required speaking to specific managers who were often not present or available,” said Christopher Mufarrige, Director of the Bureau of Consumer Protection, announcing the lawsuit on August 20.

The company’s policies are portrayed as egregious and wildly frustrating for consumers, including training staff “to reject escalated requests and to deny cancellations requested by phone or email, reiterating that all cancellations must be done in person with one specific employee or by mail.”

And Match.com recently settled with the government for $14 million for, among other practices, allegedly deceptively luring customers into subscribing for a free six month trial without making the terms of the agreement clear.

Law that would have helped enforce practices was scrapped

Last October the FTC announced a final “click-to-cancel” rule, proposed under the Biden Administration, that will require sellers to make it as easy for consumers to cancel their enrollment as it was to sign up. It would prohibit sellers from, among other things “misrepresenting any material facts while using negative option marketing; require sellers to provide important information before obtaining consumers’ billing information and charging them.”

(Negative option marketing is when companies use automatically renewing subscriptions or free trials that automatically convert to a paid subscription.)

A federal appeals court vacated the ruling in July for procedural reasons, with the strong support of affected companies such as streaming TV services and online advertisers, but the FTC has continued to target deceptive practices.

How Amazon misled customers – and what will change

The lawsuit against Amazon, filed in 2023 in the U.S. District Court for the Western District of Washington (Amazon is based in Seattle), alleged that the company “used manipulative, coercive, or deceptive user-interface designs known as ‘dark patterns’ ” to get consumers to enroll in automatically renewing Prime subscriptions.

It noted that during the checkout process, for example, the button presented to consumers to complete their transaction sometimes didn’t make it clear that clicking that option meant they were agreeing to sign up for Prime. Such practices are “not only frustrating” for users, they “also [cost] them significant money,” said then-FTC Chair Lina M. Khan.

According to the FTC, along with the $2.5 billion Amazon will pay in penalties and refunds, the settlement requires that the company:

• include a clear and conspicuous button for customers to decline Prime. Amazon can no longer have a button that says, “No, I don’t want Free Shipping.”
• include clear and conspicuous disclosures about all material terms of Prime during the Prime enrollment process, such as the cost, the date and frequency of charges to consumers, whether the subscription auto-renews, and cancellation procedures.
• create an easy way for consumers to cancel Prime, using the same method that consumers used to sign up. The process cannot be difficult, costly, or time-consuming and must be available using the same method that consumers used to sign up; and
• pay for an independent, third-party supervisor to monitor Amazon’s compliance with the consumer redress distribution process.