Amazon Prime Refund: $3 million for customers after lawsuit alleges company made subscription cancellations complicated; also pledges $1.5 million for consumer protection

Amazon has agreed to pay $3 million to eligible customers in Arizona to settle allegations that it made cancelling Prime memberships unnecessarily complicated. The agreement follows a lawsuit accusing the e-commerce giant of putting multiple hurdles in the way of subscribers who wanted to end their memberships. Under the settlement, Amazon will provide $3 million to the Arizona Attorney General's Office for distribution among eligible consumers. The company has also agreed to contribute $1.5 million to a fund supporting consumer fraud investigations and public education, and pay another $1.5 million towards the state's legal expenses.

In addition, Amazon will donate $1 million to charities chosen by Arizona Attorney General Kris Mayes. The organisations will focus on providing food to people in need, according to a report by the Arizona Daily Star.

Read more - Rs 12.6 lakh salary, Rs 9.2 crore transactions: Telecom company employee lands on Income Tax radar over businesses he claims he never owned

Amazon Prime cancellation process allegedly involved six steps

As per a TOI report, the dispute stems from a lawsuit filed by Mayes in 2024 under Arizona's consumer fraud laws. The state alleged that Amazon's online cancellation process made it difficult for customers to end their Prime memberships, despite the company's claims that subscribers could cancel at any time.

Read more - Vande Bharat Sleeper will make you forget flight journeys: Passenger offers peek inside 1AC coach with plush bedding & premium onboard service

According to the Attorney General's legal filings, subscribers had to complete at least six steps to end their memberships:

• Log in to Prime Central.
• Click on 'Manage membership'.
• Select 'End membership'.
• Click on 'Continue to cancel'.
• Select 'Continue to cancel' again.
• Finally, click on 'End now'.

The state argued that the process created unnecessary obstacles for customers and discouraged them from cancelling subscriptions they no longer wanted. It alleged that the system was designed to retain members by making the cancellation process more complicated than signing up.

Amazon allegedly reduced Prime cancellations by 14%

Mayes claimed in the legal filings that Amazon's cancellation system had helped reduce membership cancellations by 14% at one point. According to the state's allegations, fewer subscribers managed to reach the final page required to end their memberships.

The Attorney General also argued that customers were not adequately informed about the cancellation hurdles when they signed up.

Amazon Prime costs $139 a year in the US and offers benefits including free delivery, with some orders eligible for same-day service, along with other membership features.

Mayes also pointed to the commercial importance of the subscription programme. Her filings claimed that Prime members spend an average of $1,400 annually on Amazon purchases, more than twice the amount spent by non-members. They also cited around $25 billion in annual Prime subscription revenue, with approximately three-quarters coming from US customers.

Amazon denies wrongdoing despite agreeing to settlement

The Arizona settlement follows a separate agreement Amazon reached with the Federal Trade Commission (FTC) last year over allegations involving its Prime sign-up and cancellation practices. That deal included a $1 billion civil penalty and $1.5 billion in customer refunds, as well as changes to the cancellation process.

However, Mayes pursued a separate state-level case, arguing that the federal settlement might not compensate every Arizona customer affected by the alleged practices.

The spokesperson for the Arizona Attorney General's Office, Richie Taylor, said the state's aim was to recover as much money as possible for affected consumers.

Mayes said Arizonans should be able to cancel a subscription as easily as they signed up for it, without having to navigate unnecessary hurdles. She added that the settlement would provide restitution to eligible residents and that her office would continue to take action against practices involving unwanted subscriptions.

Amazon has denied violating Arizona law. Under the consent judgment, the company does not admit wrongdoing, and state attorneys have agreed not to describe its past, present or future business practices as illegal.

Amazon faces separate Arizona lawsuit over Buy Box feature

Although the Prime cancellation dispute has been settled, Amazon is still contesting another lawsuit filed by Mayes in 2024. The separate case, pending before Maricopa County Superior Court, challenges how products and sellers are displayed on the company's shopping platform.

The Attorney General alleges that Amazon's product listings can lead customers to believe that the first offer displayed is the best available deal, even when another seller may be offering the same product at a lower price.

The lawsuit focuses on Amazon's Buy Box feature, which allows shoppers to add a selected seller's offer to their cart with a single click.

Mayes alleges that the algorithm behind the feature gives an advantage to products sold directly by Amazon or by third-party sellers enrolled in its Fulfillment by Amazon programme. Under this programme, retailers pay fees for services such as storage, packaging, shipping, returns and customer communication.

According to the state, sellers outside the programme may receive less prominent placement even when their prices are lower. The lawsuit claims this could result in customers paying more than necessary. It also alleges that nearly 98% of purchases are made through the Buy Box.

Amazon has rejected the accusations, arguing that the lawsuit was filed without reviewing company documents and is based on a misunderstanding of how its business operates.

The separate case remains ongoing, with no hearing date set so far.


Inputs from TOI