STEVE INSKEEP, HOST:
Millions of Amazon shoppers might be getting a refund. That's because of a $2.5 billion settlement, which the company reached to end a Federal Trade Commission lawsuit over its Prime membership program, Amazon Prime. The government had accused Amazon of trapping people into signing up for Prime and then making it hard to cancel. We'll note that Amazon is among NPR's recent financial supporters, but we cover it like any other company. NPR's Alina Selyukh is here to do that. Good morning.
ALINA SELYUKH, BYLINE: Good morning.
INSKEEP: What did Amazon agree to do?
SELYUKH: So Amazon has agreed to a settlement of historic proportions. Amazon has agreed to pay $1 billion in civil penalties that goes to the government, and then another billion and a half in refunds to Amazon shoppers.
INSKEEP: There we go.
SELYUKH: And this means millions of people will get automated reimbursements of about $51 over the next three months, and then millions more will be able to file claims. Amazon will notify them. And in exchange for doing all of this, Amazon, without admitting any wrongdoing, now gets to move on. And it ends a federal lawsuit that's hung over the company for two years now. And it just actually went to trial just this week.
INSKEEP: OK, they don't admit wrongdoing, but what is it the government said they did?
SELYUKH: The government, the Federal Trade Commission, had alleged that Amazon tricked tens of millions of people into signing up for Prime and then kind of trapped them by making it difficult to cancel. The case focused on what's called dark patterns. These are web designs that can manipulate people into, in this case, enrolling in Prime. And one example the government gave was, like, a huge yellow button that says get free shipping. And by clicking it, you sign up for an annual subscription to Prime.
INSKEEP: Oh, that's in the small print that you're...
SELYUKH: Well, and then in the small print, in contrast, you have to click the blue, tiny blue hyperlink that says I don't want fast free shipping. And that avoids enrolling in Prime.
INSKEEP: (Laughter) Go on.
SELYUKH: And so then to cancel on the other side, the FTC described a journey through 15 options, having to click through like four different pages to cancel Prime. And a lot of these designs, Amazon has long changed them. But the FDC was trying to establish that these dark patterns can be fraud.
INSKEEP: OK, first, thank you for reminding me that anytime I'm online, I'm liable to be in a manipulated space that is doing things to me without me quite realizing. But why did Amazon decide to settle?
SELYUKH: So Amazon in a statement said it broke no laws and simply wanted to put this case past it, to focus on its business, its customers. But the judge did have time to make some preliminary rulings against Amazon. He said Amazon acted illegally when it collected people's billing details before fully disclosing terms of a Prime subscription. And in the jury trial, we were just starting to hear from some government witnesses, one of whom was a former designer at Amazon. And he testified that he and his team repeatedly flagged that lots of shoppers were signing up for Prime by accident. They were thinking they were just paying for items. And then Amazon would change the designs to make them clearer, and the subscription numbers would drop, and so they would backtrack.
INSKEEP: Oh, interesting. They needed the manipulation to make quite as much money as they were making.
SELYUKH: That was the case the government was trying to make.
INSKEEP: Well, does this settlement mean a huge shift for Amazon?
SELYUKH: It's hard to say. Like I said, Amazon has already made a lot of the design changes. Two and a half billion dollars, it is a huge settlement. But last year, Amazon brought $44 billion in subscription revenues.
INSKEEP: Wow.
SELYUKH: Including Prime. And one thing about Prime subscribers is that they're loyal. It's one of the keys to success for Amazon. People who use Prime shop more frequently. They buy more stuff. Will their ranks thin out? Will their habits change? I really don't know. But I do want to add that on the legal front, Amazon is still fighting another federal lawsuit. It accuses Amazon of operating as a monopoly. And that case goes to trial in 2027.
INSKEEP: NPR's Alina Selyukh. We will listen for your reporting on that. Thanks so much.
SELYUKH: Thank you. Transcript provided by NPR, Copyright NPR.
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