In September 2025 Amazon agreed to a $2.5 billion settlement with the US Federal Trade Commission over allegations that it enrolled people in Prime without clear consent and made cancelling deliberately hard. It paid a $1 billion civil penalty and $1.5 billion in refunds, and must now disclose cost, renewal and cancellation terms at sign-up and let people cancel as easily as they joined.
Key takeaways
- Amazon's subscription services revenue, mostly Prime, reached $13.73 billion in Q2 2026, up 12%.
- On 25 September 2025 the FTC announced a $2.5 billion settlement: a $1 billion civil penalty plus $1.5 billion in consumer refunds.
- Amazon must now disclose price, renewal timing and how to cancel at sign-up, and offer cancellation through the same method customers used to join.
- Friction is not a retention strategy. Value, pause options and downgrades are.
- Australia's own subscription-trap rules are due from 1 July 2027, so local businesses should fix their flows now.
When I wrote The Subscription Playbook, a box of my favorite peppermint tea landed on my doorstep every four weeks.
I set it up once on Amazon's Subscribe and Save. I saved 10% on what a one-off order would cost. I never had to think about it.
That's the dream subscription. The customer is happy, the seller has recurring revenue, and nobody has to remember anything.
But there's a dark side to "nobody has to remember anything." When a business starts relying on customers forgetting they're subscribed, or on cancellation being too painful to bother with, the subscription stops being a service and starts being a trap.
In 2025, Amazon found out what that costs.
What did the book say about Amazon Prime in 2022?
Amazon turns up three times in The Subscription Playbook:
- In Chapter One, Prime is one of the subscriptions "everyone" pays for, next to Netflix and Dropbox.
- In the Consumables model in Chapter Two, Subscribe and Save is how I get my tea: things you use up and need to reorder.
- In the Unlimited Content model, Prime sits alongside Netflix, Spotify and Disney+.
It's also the textbook Member Benefits program: pay one fee, get a bundle of perks (shipping, video, deals) you couldn't get otherwise. In the book, Amazon was the example of everything going right.
What's happened since?
Two things. The business kept growing, and the regulator came knocking.
The growth
Amazon reports a line called "subscription services," which is mostly Prime. In Q2 2026 it reached $13.73 billion, up 12%. Excluding currency effects, it grew between 10% and 12% in every quarter from Q1 2025 through Q2 2026.
That is a huge, mature membership still growing at double digits. The value is real.
The settlement
On 25 September 2025, the US Federal Trade Commission announced a $2.5 billion settlement with Amazon. The FTC had alleged that Amazon enrolled consumers in Prime without their consent and made cancelling deliberately hard.
Here's how the money broke down, and what Amazon had to change:
| Part of the settlement | What it means |
|---|---|
| $1 billion civil penalty | A fine paid to the government |
| $1.5 billion in consumer refunds | Payments started November 2025; the FTC expanded and accelerated them in September 2026 |
| Clear disclosure at sign-up | Cost, when it renews, and how to cancel |
| Easy cancellation | Customers must be able to cancel using the same method they used to sign up |
A billion-dollar penalty. For a sign-up and cancellation flow.
Columbia House, again
In Chapter One I told the story of Columbia House, the record club that grew huge on "free" records and then made its subscription "less transparent than it should have been." It angered a lot of customers. Nearly 100 years after the subscription model took off with Book of the Month Club, the same mistake is still being made, only now regulators are putting a price on it.
Why did the best membership in the world need friction at all?
That's the question I keep coming back to.
Prime doesn't need a hard cancellation flow. Its revenue kept growing at 10% to 12% through the whole period, settlement included. Members stay because the shipping, video and deals are worth the fee.
So why risk it?
My guess is the same reason many businesses do it: someone measured cancellations, saw that every extra screen in the cancel flow lowered the number, and called it a win. On a dashboard, friction looks like retention.
It isn't. It's deferred churn plus legal risk. The customer who wanted to leave still wants to leave. Now they're also angry.
This ties straight back to the book's churn advice in Chapter Nine. Define what success looks like for the customer, make sure they reach it, and keep the feedback loop open. A customer who gets value doesn't need to be trapped.
Would your cancellation flow pass?
Check your sign-up and cancellation flow against the new Australian rules with the free AU Subscription Compliance Checker.
What does this mean in Australia?
If you sell subscriptions to Australians, don't treat this as an American story.
The Australian Consumer Law already bans misleading and deceptive conduct. On top of that, specific subscription-trap rules are due to start on 1 July 2027. I've covered what's known so far in our guide to Australia's subscription trap laws, and how to build a compliant exit in cancellation flows that save customers legally.
This is general information, not legal advice. If your sign-up or cancellation process has any "gotchas" in it, talk to a lawyer before the rules start, not after.
What you can steal
Here's the playbook I'd use for any subscription, from a cafe coffee club to a SaaS product.
- Disclose four things at sign-up. The price, the billing date, that it renews automatically, and how to cancel. Put them next to the "Join" button, not in the terms.
- Let people leave the way they came in. Signed up online? Cancel online. Signed up in store? Cancel in store or online. No phone-only cancellations.
- Offer a pause and a downgrade. Many people cancelling just need a break or a cheaper option. Offer both on one screen, then respect the answer.
- Show the value before they go. A short "here's what you've saved this year" summary is honest and often persuasive. Prime's real retention tool is the value, not the maze.
- Send renewal reminders. Especially before annual renewals. A surprised customer becomes a complaint. A reminded customer usually just renews. Our renewal reminder email templates give you wording to start from.
- Measure churn honestly. If your churn only looks good because people can't find the exit, you don't have good churn. Work out your real rate with the churn calculator.
The lesson
Member benefits are one of the strongest subscription models there is. I still recommend the member benefits model to plenty of businesses, and the consumables model remains one of the easiest ways for a product business to add recurring revenue.
But Amazon's $2.5 billion bill makes the point better than I ever could: you win retention with value, not friction.
So look at your own sign-up page tonight. Would a stranger know exactly what they're agreeing to? And could they leave in under a minute?
If not, fix that first. For the wider regulatory picture, see how the FTC's click-to-cancel rule played out.
Frequently asked questions
Did Amazon admit wrongdoing in the Prime settlement?
The FTC's case was based on allegations that Amazon enrolled consumers in Prime without consent and made cancellation hard. Amazon agreed to settle for $2.5 billion and to change its sign-up and cancellation flows. Settlements like this usually resolve the case without a court finding on every allegation, so describe it as a settlement of allegations rather than a proven breach.
Who gets the Amazon Prime refunds?
The $1.5 billion in refunds is for eligible US consumers covered by the settlement. Payments started in November 2025 and the FTC announced expanded and accelerated payments in September 2026. The FTC runs a dedicated Amazon refunds page with eligibility details, so check there rather than relying on third-party summaries.
Is Amazon Prime still growing after the settlement?
Yes. Amazon's subscription services revenue, which is mostly Prime, was $13.73 billion in Q2 2026, up 12%. Excluding currency effects it grew between 10% and 12% in every quarter from Q1 2025 to Q2 2026. The settlement was expensive, but the underlying value of the membership kept members paying.
What is a 'dark pattern' in a subscription?
A dark pattern is a design choice that nudges people into something they didn't intend, or makes it hard to undo. In subscriptions the common ones are pre-ticked sign-up boxes, unclear renewal terms, and cancellation paths hidden behind several screens of offers. Regulators in the US, UK and Australia are now targeting exactly these patterns.
Does this apply to small businesses or just Amazon?
The FTC case was about Amazon, but the principles apply to anyone selling subscriptions. In Australia, the Australian Consumer Law already prohibits misleading conduct, and specific subscription-trap rules are due from 1 July 2027. A cafe coffee club or a gym membership with a hidden cancellation process carries the same kind of risk at a smaller scale. Get advice if you're unsure.
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Robert Coorey, MBA
Robert is the author of The Subscription Playbook and Feed a Starving Crowd and a Director at BPAG Accountants in Sydney. More about Robert.
Sources
- FTC, FTC Secures Historic $2.5 Billion Settlement Against Amazon (25 Sep 2025)
- FTC, Amazon refunds
- FTC, additional payments to consumers from the Amazon Prime settlement (Sep 2026)
- Amazon, Second Quarter 2026 Results
Facts and prices checked 27 October 2026. Spotted something out of date? Tell us.