The Amazon FTC Settlement Through an Amazon Customer Lens
Last week Amazon and the Federal Trade Committee surprised a lot of us with a $2.5 billion settlement on the third day of the highly anticipated trial over Amazon’s Amazon Prime sign-up and cancellation methods. Among the reasons suggested for the quick and lofty settlement was the belief that Amazon will pay just about anything to maintain their most closely guarded secrets - in this case, about the inner workings of the all-important Prime membership program.
Others have put the magnitude of the settlement in perspective, comparing it to Amazon’s revenue and net income ($638 billion and $59 billion, respectively, in 2024). As long-time analysts of Amazon customers, shopping, and Prime membership, we want to look at how the settlement relates to Amazon’s core retail business and Prime membership program. As it turns out, the settlement will affect a relatively small number of small spending Amazon customers.
The lawsuit and settlement cover the period from June 23, 2019 to June 23, 2025. We have surveyed 500 US Amazon shoppers quarterly since 2013, so we have a sample of 12,000 US customers from the relevant period.
In addition to paying a $1 billion fine to the FTC, the settlement calls for between $1 and $1.5 billion in payments to affected Amazon customers. (The payment method must be independent of Amazon, so no gift cards…) Importantly, the methodology for identifying consumers eligible for compensation focuses on the number of times they used an Amazon Prime benefit. This presumably includes fast, free shipping, viewing streaming video, or taking advantage of Prime member pricing on Prime Day, for example.
The plan seeks to compensate customers that had a Prime membership but didn’t use it very much. The idea is, customers who unknowingly signed-up and paid for Prime or struggled to cancel their membership, can be identified by their minimal use of the program. The first phase compensates Prime members who used Amazon Prime “benefits” three or fewer times. After that, it provides possible similar compensation for those who used the benefits 10 or fewer times.
To understand this, we used our data set to isolate low-frequency Prime benefits users. We divided Amazon shoppers into those who reported shopping less often than monthly, and those who reported shopping monthly or more frequently. Overall, 24% of all customers fall into the low-frequency group, giving us some idea of the possible scope of the settlement. 45% of the low-frequency shoppers reported having a Prime membership, compared to 78% of the high-frequency shoppers.
The settlement, of course, applies only to Amazon customers that have a Prime membership. Specifically, it covers those that had a Prime membership they did not want, as revealed by their minimal use of it. Among all US Amazon Prime members only 15% of customers fall into the low-frequency group (Chart 1).