Amazon to pay $2.5 billion to settle FTC lawsuit over Prime subscription; two executives prohibited from…

Amazon has agreed to pay $2.5 billion to settle a lawsuit filed by the US Federal Trade Commission, accusing the e-commerce giant of misleading millions of customers into signing up for Prime subscription and intentionally making it difficult to cancel. According to a Bloomberg report, Amazon will pay $1 billion in civil penalties and will refund $1.5 billion to customers to resolve FTC’s allegations. The e-tailer will also simplify its process to cancel the Prime subscription. The settlement comes three days after the two picked a nine-person jury to decide whether Amazon and the executives were liable. As per the Bloomberg report, the settlement will remain in effect for 10 years. Further, Amazon and two of its executives – Neil Lindsay and Jamil Ghani will be prohibited from engaging in deceptive conduct involving Prime Subscriptions under the settlement.A third executive, Russell Grandinetti, was dismissed from the case. In a statement, Amazon spokesperson Mark Blafkin said “Amazon and our executives have always followed the law and this settlement allows us to move forward and focus on innovating for customers”.The FTC, which oversees antitrust and consumer protection, sued Amazon and three executives in 2023, alleging the company’s practices violated a 2010 law meant to safeguard online shoppers.In a court filing from earlier this month, FTC said: “Millions of consumers accidentally enrolled in Prime without knowledge or consent, but Amazon refused to fix this known problem, described internally by employees as an ‘unspoken cancer’ because clarity adjustments would lead to a drop in subscribers.”The agency also said the cancellation process, known inside Amazon as “Iliad,” was a deliberate maze: “Prime’s cancellation flow … is a labyrinthian mechanism that Defendants know deters consumers from cancelling or misleads consumers into believing they successfully cancelled Prime when they in fact did not.”The FTC called the settlement “historic”.Prime membership costs $139 a year, or $15 per month in the US. Amazon reported $12.2 billion in subscription services revenue, largely from global Prime memberships, for the quarter ended June 30 — an 11% rise from a year earlier.Under the terms of the settlement, Amazon customers will receive refunds of as much as $51.