Amazon (AMZN) faced a legal setback after a U.S. judge ruled the company violated consumer protection law in the way it enrolled Prime members. Judge John Chun said Amazon collected billing information from new subscribers before disclosing all Prime terms, which breached the Restore Online Shoppers Confidence Act (ROSCA).
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The ruling marked an early win for the Federal Trade Commission (FTC), which is suing Amazon over Prime signups. The FTC argues that Amazon signed up a large number of users without clear consent and made the cancellation process so complicated that many customers could not end their subscriptions.
FTC Strengthens Case against Amazon
The FTC claims that Amazon used unfair methods to grow its Prime signups. The judge also ruled that two Amazon executives could be held liable if violations are proven at trial.
Chris Mufarrige, head of the FTC’s consumer protection bureau, said the ruling “affirms that Amazon defrauded American consumers” by taking payment details before showing all Prime terms. He added that the FTC “intends to make them whole” by compensating customers for the harm caused.
However, Amazon has denied the allegations. The company said Prime terms were clear and that cancellations are simple. The trial will decide whether Amazon faces penalties or must change how it markets Prime.
What It Means for Investors
Prime is a key revenue driver for Amazon, providing recurring subscription income and encouraging higher spending from members. In the last reported Q2 FY25 earnings call, subscription services (including Prime memberships) brought in about $12.2 billion for the company.
Any legal limits on how the company signs up or retains users could weigh on future growth in this segment. The case also highlights rising regulatory scrutiny of large technology firms in the U.S. and abroad.
Is Amazon a Buy, Hold, or Sell?
Turning to Wall Street, AMZN stock has a Strong Buy consensus rating based on 44 Buys and one Hold assigned in the last three months. At $264.45, the average Amazon stock price target implies a 14.17% upside potential.
