Amazon Prime Cancelled: Amazon settles with the FTC over Prime’s Subscription Tactics

Photo by Bryan Angelo on Unsplash

Amazon Prime under scrutiny

If you are an Amazon Prime user, you might be entitled to a refund up to $51! Just days into a civil jury trial, Amazon settled its case with the Federal Trade Commission on September 25th over allegations that it lured online shoppers into subscribing to its signature Prime service and made it difficult to cancel the $139 annual service.

Amazon Prime is a significant contributor to the company’s success. About 200 million people in the U.S. use Prime to shop, and Amazon’s subscription services brought in over $44 billion in revenue in 2024. Prime users are also Amazon’s most loyal customers: they shop more often and buy more than people without the service. Even after the settlement, the basic relationship between Amazon and its Prime members isn’t likely to change.

The FTC initiated its suit against Amazon on June 21, 2023, in the U.S. District Court for the Western District of Washington, alleging that the process of signing up for Amazon’s Prime service violated Section 5 of the FTC Act and Section 4 of the Restore Online Shoppers' Confidence Act (ROSCA). The FTC claimed Amazon used manipulative website design tactics, called “dark patterns,” to push users toward unwanted subscriptions, and once users are on the hook, Amazon made the cancellation process complicated, discouraging unsatisfied customers from leaving at every turn. 

For example, Amazon’s checkout page contained a large orange button reading “Get FREE Same-Day Delivery,” which automatically enrolled users in Prime, while the opt-out link, which read “No thanks, I do not want FREE delivery,” appeared only in small gray text. The FTC also alleged that Amazon buried recurring-charge disclosures in fine print, required multiple clicks and pages to cancel, and bombarded customers with retention offers once they found it. Internally, the company allegedly called this cancellation process “Iliad,” after Homer’s famously lengthy epic. According to the FTC’s complaint, Amazon knew many users had accidental Prime enrollments and rejected or delayed design changes that would have made canceling easier.

In the months leading up to trial, the case grew increasingly tense. The FTC accused Amazon of holding back tens of thousands of documents during discovery, and Judge John H. Chun publicly admonished the company for what he called behavior “tantamount to bad faith.” Amazon also tried to appeal several of the judge’s orders, but Chun denied those requests, saying they would only delay the trial. Finally, on September 18, 2025, Judge Chun granted the FTC partial summary judgment, finding that Amazon violated consumer-protection laws by collecting customers’ payment information before disclosing key terms such as the automatic renewal policy, monthly charge, and cancellation requirements. “No reasonable jury could find in favor of Amazon,” Chun wrote.

A week later, on September 25, 2025, Amazon and the FTC quickly settled at an amount up to $2.5 billion, ending the case just days into trial. Amazon agreed to pay $1 billion in penalties and between $1 billion and $1.5 billion in consumer refunds. Within 90 days, customers who meet certain criteria will automatically receive $51 refunds. The criteria include signing up between June 23, 2019, and June 23, 2025, and scarcely using Prime benefits like video streaming after enrollment. Other customers who unintentionally enrolled but were misled or misled or discouraged away from canceling may also submit claims for compensation.  Judge Chun dismissed the jury after the deal was filed. The FTC called it one of the largest consumer-protection settlements in its history, framing the case as a landmark warning against the use of “dark patterns” in online subscription design.

What is ROSCA 

In the now-settled suit against Amazon, the FTC employs a common playbook it uses against many online subscription services. The FTC alleges violations of Section 5(b) of the FTC Act and Section 4 of ROSCA. As compared to the FTC Act’s broad reach, ROSCA targets a very specific type of business practice. 

The Restore Online Shoppers' Confidence Act (ROSCA) was passed in 2010 to ensure online consumers engage in transactions of subscription services only with explicit consent. ROSCA specifically limits businesses' ability to employ “negative option features” or “dark patterns” in online transactions. The FTC elucidates in an enforcement policy statement the meaning of “negative option feature” in ROSCA as “a provision under which the customer’s silence or failure to take an affirmative action to reject goods or services or to cancel the agreement is interpreted by the seller as acceptance of an offer to sell or provide any goods or services”. 

Common practices of negative option features include automatic renewals and “free-to-pay.” In automatic renewal, once a consumer signs up for a subscription service, the seller renews the subscription (and charges the consumer) without further notice unless the consumer takes affirmative action to cancel the subscription. In a “free-to-pay” setting, a consumer first enjoys a free trial period, but at the end of the trial period, the seller charges for the subscription service without notice unless the consumer takes affirmative action to cancel the plan. 

ROSCA follows a now common “disclosure-consent” framework that governs online consumer interaction. It mandates three distinct steps for compliance. First, the business has to clearly and conspicuously disclose all “material terms of the transaction” before collecting consumer billing information. Second, the business must obtain a consumer’s express informed consent before charging the consumer. The required disclosure should cover both the terms of the transaction, such as automatic renewals, and the underlying product or service. The scrutiny over the disclosure requirement not only concerns what’s disclosed, but also how it is presented to the consumer. Adequate disclosure contributes to “express informed consent”. 

Third, the service must provide a simple cancellation mechanism. In a 2021 enforcement policy statement, the FTC stated that, as a guiding principle, “negative option sellers should provide cancellation mechanisms that are at least as easy to use as the method the consumer used to initiate the negative option feature.” Further, the FTC suggested that sellers should “provide their cancellation mechanisms at least through the same medium (such as website or mobile application) the consumer used to consent to the negative option feature” and should not “impose unreasonable delays on consumers’ cancellation efforts.”

In the Amazon case, the FTC won on a summary judgment motion for Amazon’s violation of the first requirement that it did not adequately disclose the terms of the Prime membership before collecting billing information. The second and third requirements regarding consumer express informed consent and cancellation mechanism were submitted to the jury to decide. 

The Amazon ROSCA case also demonstrates a few more unique features of the FTC’s enforcement pattern on ROSCA. In the Amazon case, three executives, Neil Lindsay, Russell Grandinetti, and Jamil Ghani, were named as defendants. Both companies and individual executives could be held jointly and severally liable for ROSCA violations. To find individual liability for a ROSCA violation, the individual executive needs to have both knowledge of the alleged conduct and either the authority to control the conduct or direct participation in the conduct. At the time of the trial, because of Lindsay and Ghani’s high degree of involvement in Amazon Prime, they would be held liable if the company were held liable. The third executive’s individual liability was an issue submitted to the jury. Partially because of the high risk of individual liability, Amazon settled quickly. 

The FTC increasingly relies on ROSCA in addition to the FTC Act because ROSCA expands the FTC’s arsenal for remedies. In AMG Capital Management, LLC v. FTC, the U.S. Supreme Court limited the FTC’s ability to seek equitable monetary relief under Section 13(b) of the FTC Act for violations of Section 5 of the Act. Instead, the FTC can only seek injunctive relief for violations of the FTC Act. 

ROSCA empowers the FTC with more options. Not only do violations of ROSCA impose civil penalties, but the FTC can rely on Section 19 of the FTC Act to seek equitable monetary relief for violations of ROSCA, an approach that is closed for violations of Section 5. 

Subscription Economy

The Amazon ROSCA case is just a recent manifestation of the law in the subscription economy. For Amazon, the last-minute settlement saves the company from the worst outcome, but it doesn’t present clear guidelines for a ballooning number of subscription services. A subscription model provides a business with a predictable cash flow, which is a valuable asset both for investors and in times of economic uncertainty. Hence, economic reality incentivizes businesses to induce consumers into a subscription as easily as possible and make the cancellation process as hard as possible. Additionally, by keeping customers in a subscription model, businesses can collect more valuable personalized customer data as opposed to data from one-off transactions. The subscription economy is here to stay. 

Meanwhile, the governing law for the gates of subscription services remains inherently fact-intensive and subjective. What do “simple” and “clear and conspicuous” really mean? More lawsuits with similar fact patterns are on the way. This year alone, the FTC has brought two cases on subscription practices against two prominent businesses: one against LA Fitness and one against Uber. Between a strong economic incentive and inherently ambiguous law, businesses will continue to test the limits of the law.

*The views expressed in this article do not represent the views of Santa Clara University.