The Federal Trade Commission (FTC) announced today that it had reached a historic $2.5 billion settlement with Amazon to resolve claims that Amazon enrolled millions of consumers in Prime subscriptions without their consent, and knowingly made it difficult for consumers to cancel.
Amazon Prime Trial/Settlement
This massive settlement with Amazon came on the eve of the beginning of a jury trial between Amazon and the FTC—over whether the company duped users into paying for Prime memberships—was set to begin.
The FTC’s lawsuit alleged that Amazon deceived customers into signing up for its Prime subscription program and made it deceptively difficult to cancel it. The FTC alleged that Amazon tricked customers into subscribing to Prime by failing to clearly disclose that consumers were agreeing to join Prime for a recurring subscription.
“Millions of consumers accidentally enrolled in Prime without knowledge or consent, but Amazon refused to fix this known problem, described internally by employees as an ‘unspoken cancer’ because clarity adjustments would lead to a drop in subscribers,” the agency wrote in a court filing last week.
The FTC also alleged that the Amazon cancellation process was confusing, requiring users to navigate four webpages and choose from 15 options—a “labyrinthian mechanism” that the company referred to internally as “Iliad,” referencing Homer’s epic poem about the Trojan War.
The settlement includes a $1 billion civil penalty, the largest ever in a case involving an FTC rule violation, and $1.5 billion in consumer redress, providing full relief for the estimated 35 million consumers impacted by unwanted Prime enrollment or deferred cancellation. This is the second-highest restitution award ever obtained by FTC action.
The Chegg Settlement
This blockbuster settlement with Amazon comes close on the heels of the FTC’s recent enforcement action against LA Fitness for their subscription cancellation practices and the FTC’s announcement on September 15, 2025 of a proposed $7.5 million settlement with Education Tech provider, Chegg, over allegations that the company failed to honor cancellation requests and failed to provide a simple way to cancel auto-renewal subscriptions for online learning tools. Here, the FTC alleged that Chegg used cancellation practices that made it almost impossible to cancel recurring subscriptions and that several federal statutes require retailers to clearly and conspicuously disclose the material terms of the subscription, obtain consumers’ express, informed consent before charging them, and provide simple ways to stop recurring charges.
These are just the latest examples of the FTC’s continued focus on subscription, recurring charges, and so-called “negative option” plans.
State-Level Focus On Similar Issues
The subscription enforcement trend is not limited to federal action. Following patterns seen in other regulatory areas, such as data privacy and consumer protection, states are increasingly stepping in to bolster, or in some cases replace, federal oversight of subscription practices. California’s Automatic Renewal Law (CARL), first enacted in 2010 and amended effective July 1, 2025, now applies to subscriptions that are “free-to-pay conversions”—subscriptions that begin with a free trial and automatically convert to a paid subscription after an initial period. The law requires companies to “obtain the consumer’s express affirmative consent to the automatic renewal or continuous service offer terms,” and makes clear that if a user signs up for a service online, they must be able to cancel online as well.
In addition to California, Arkansas, Colorado, Massachusetts, New York, Maine, Maryland, and Connecticut have all either enacted or updated similar legislation requiring immediate processing of cancellation requests and prohibiting companies from requiring consumers to speak with agents to cancel online subscriptions. Illinois, Florida, and Vermont have also passed subscription transparency laws with varying requirements for disclosure and cancellation processes.
These state laws often carry more stringent requirements than federal regulations and may include private rights of action, allowing consumers to sue directly for violations. This patchwork of state regulations creates additional compliance complexity for businesses operating across multiple states, as they must navigate varying disclosure requirements, cancellation timelines, and penalty structures.
Why Should Dealers Care?
As we have discussed in previous alerts, dealers may be involved with more recurring charge/subscription/negative option offerings than you may realize. For dealers that provide or offer (whether for yourself, a third party, or the OEM) subscription products, including, but not limited to, products or services like pre-paid maintenance, satellite radio, software of other subscriptions, entertainment services, and roadside assistance—whether these products are sold by the dealer as F&I products, or by the manufacturer, with the dealer’s assistance—it is important to understand the clear trends toward increased enforcement over these types of offerings.
Key Takeaways from Recent FTC Enforcement Actions
Make cancellation easy.
Don’t make the cancellation process a confusing and cumbersome process. In addition, don’t bury the online cancellation process in your website, and don’t require multiple clicks to locate the cancellation feature.
Discontinue billing.
Once the customer cancels, process the cancellation promptly and don’t continue to charge them for the cancelled service.
Avoid “dark patterns.”
Don’t use manipulative interface designs or retention tactics that confuse or pressure consumers into maintaining subscriptions they want to cancel.
Provide clear disclosure.
Ensure all material terms of subscription services, including what the charges will be, when they will start, whether they auto-renew, and how to cancel, are clearly and conspicuously disclosed before consumers commit to the service.
Third-Party Product Complications.
Many dealer subscription services are actually provided by third parties (such as satellite radio or roadside assistance). Dealers cannot simply defer responsibility to these providers and must ensure their customers have clear paths to cancellation, even for third-party services sold through the dealership. Maintain comprehensive records of all subscription sales and cancellations. Ensure that any third parties, including the OEM, provide adequate notice and processes, and that they document that for your protection.
Train F&I and Service Staff.
Train F&I, service advisors, and general customer service employees on proper subscription disclosure and cancellation procedures. Implement systems to track and manage subscription services sold and cancelled. Establish clear protocols for handling cancellation requests.
What’s The Bottom Line?
The message from recent FTC and state actions is clear: make it easy for customers to understand what they’re buying, and make it just as easy for them to cancel (should they choose to do so), as it was to sign up.