Amazon hit with $2.5B in fines and refunds as FTC cracks down on Prime’s “subscription traps,” forcing changes to sign-up and cancellation.
👉 Background: Amazon Prime launched in 2005 as a subscription service offering free shipping and fast delivery. Since then, it’s exploded into a $44 billion USD-a-year giant with nearly 197 million US members... more than half the country’s population.
👉 What happened: Now, the US Federal Trade Commission (FTC) hit Amazon with $1 billion USD in penalties and $1.5 billion USD in customer refunds, claiming Prime made it easy to sign up to a subscription but very difficult to cancel. This is the largest civil penalty ever for an FTC rule violation.
👉 What else: The payout equals 5.6% of Prime’s annual revenue. While Amazon denied wrongdoing, it agreed to changes including clearer disclosures and easier cancellation buttons to help consumers avoid falling into a subscription trap.
What's the key learning?
💡Subscription traps are designed to keep customers paying longer than they intend by making cancellation difficult.
💡Amazon’s own staff described parts of the Prime sign-up flow as a “conversion trap,” and more than 35 million US customerswere believed to be caught in it.
💡While subscription traps may look like “free money” for businesses, Amazon’s billion-dollar penalty shows the financial reality can backfire... and could push other companies to drop these tactics.
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