The Prinz Law Office

The Federal Trade Commission (“FTC”) has just obtained a $2.5 billion settlement against Amazon over its “deceptive” subscription practices. To view the announcement by the FTC click here.    Amazon will be required to pay a $1 billion civil penalty, provide $1.5 billion in refunds back to affected consumers, and cease its unlawful enrollment and cancellation practices.

As the Silicon Valley Software Law Blog has previously reported, consumer subscriptions have become a recent focus for the FTC as well as other state regulatory agencies around the country over enrollment, auto-renewal and cancellation practices, which state and federal governments have deemed to be deceptive and unfair.   In the case of Amazon, the FTC alleged that “the evidence showed that Amazon used sophisticated subscription traps designed to manipulate consumers into enrolling in Prime and then made it exceedingly hard for consumers to end their subscription.”

The FTC alleged that Amazon had violated Section 5 (a) of the FTC Act, 15 USC Section 45(a) prohibiting “unfair or deceptive acts or practices in/or affecting commerce” when it charged customers for subscriptions without their express consent.

Also, the FTC alleged that Amazon  had violated the Restore Online Shoppers Confidence Act (“ROSCA”), 15 USC Sections 18401-05, by charging consumers through a negative option feature without (a) clearly and conspicuously disclosing all the material terms of the transaction before obtaining the consumer’s billing information, (b) obtaining the consumer’s express informed consent before making the charge, and (c) providing simple mechanisms to stop recurring charges.   The FTC’s Telemarketing Sales Rule (“TSR”) defines a negative option feature to constitute “an offer or agreement to sell or provide any goods or services. . . under which the consumer’s silence or failure to take an affirmative action to reject goods or services or cancel the agreement is interpreted by the seller as acceptance of the offer.”

The FTC’s settlement with Amazon requires Amazon to stop these subscription practices and make the following changes:

1) Include a clear and conspicuous button for customers to decline Prime.  In particular, Amazon can no longer have a button that says “No, I don’t want free shipping.”

2) Include clear and conspicuous disclosures about all material terms of Prime during the Prime enrollment process, such as the cost, the date and frequency of charges to consumers, whether the subscription auto-renews, and cancellation procedures.

3) Creating an easy way for consumers to cancel Prime, using the same method that consumers used to sign up.  The process cannot be difficult, costly, or time-consuming and must be available using the same method that consumers used to sign up; and

4) pay for an independent, third-party supervisor to monitor Amazon’s compliance with the consumer redress distribution process.

What do software companies utilizing the subscription model need to know about the Amazon case?

First and foremost, if your software company is utilizing the subscription business model, you need to comply both with the FTC Act and with ROSCA.  This means that you need to obtain express consent from customers to enter into the subscription, and before you charge your customer, you need to (a) clearly and conspicuously disclose the material terms of the transaction before obtaining billing information from the customer, (b) obtain express informed consent from the customer before making the charge, (c) provide a simple mechanism to stop recurring charges.   You also need a clear and conspicuous button for your customers to decline the subscription (that identifies itself as a button to cancel the subscription); you need to describe clearly the cost, date and frequency of charges, whether the subscription auto-renews, and the cancellation procedures.  Finally, you need to create an easy method for consumers to cancel the subscription, using the same method the customers used to sign up.  The process cannot be difficult, costly, or time-consuming.

These requirements apply to consumer-focused subscriptions; however, it is my position that these requirements should be viewed as best practices for the industry, even where the customers are businesses, and that businesses should adhere to the requirements as well.

Has your software company obtained a recent review of its subscription practices and subscription terms by a SaaS and software contracts lawyer?  Schedule a new client consultation today at this link.

This video was recently recorded by Kristie Prinz on 5.15.25.

If you run a subscription-based SaaS or tech business and have not reviewed your subscription practices lately, the FTC is again putting you on notice that subscription practices are an oversight and enforcement priority for the federal agency.

The FTC just recently filed suit against Uber Technologies, Inc. and Uber USA, LLC in the Northern District of California on April 21, 2025, alleging that the defendant utilized deceptive billing and cancellation practices.  A copy of the FTC complaint is attached at this link.  A copy of the press release issued by the FTC on the case is linked here.

The key factual allegations of the complaint include as follows:

• Consumers were promised a specific amount of savings that did not take into account the monthly price of the subscription.
• Consumers say they were charged without their consent, and in some cases were charged when they did not even have an account.
• Consumers say they were charged before their billing date, including before their free trials ended, despite being promised by Uber that they could cancel at no charge during their free trials.
• Consumers say that it was extremely difficult to cancel, and that they were often charged the renewal subscription fee while they were waiting on customer service to respond and grant the cancellation.

The FTC alleges that Uber’s deceptive billing and cancellation practices violate the FTC Act and the Restore Online Shoppers’ Confidence Act (“ROSCA”).  According to the FTC, these regulations require online retailers to  do the following:

• clearly disclose the terms of the service;
• obtain consumer’s consent before charging them for a service; and
• provide a simple method to cancel recurring subscriptions.

In particular, the FTC alleges in its complaint that Uber failed to clearly and conspicuously disclose before obtaining consumer billing information all the material terms of the transaction, including

• that they are being enrolled in a recurring paid subscription;
• the amount of money that consumers in these subscriptions actually save;
• when they will be billed or charged; and
• the method of cancellation.

According to the FTC, Section 4 of ROSCA, 15 U.S.C. § 8403, prohibits charging consumers for goods or services sold in transactions effected on the Internet through a negative option feature, as that term is defined in the Commission’s Telemarketing Sales Rule (“TSR”), 16 C.F.R. § 310.2(w), unless the seller provides text that “clearly and conspicuously discloses all material terms of the transaction before obtaining the consumer’s billing information, obtains the consumer’s express informed consent for the charges, and provides simple mechanisms for a consumer to stop recurring charges.”

Also, the FTC claims that the TSR defines “negative option feature” to constitute a term in an offer or agreement for goods or services “under which the customer’s silence or failure to take an affirmative action to reject goods or services or to cancel the agreement is interpreted by the seller as acceptance of the offer.”

What are the lessons to be learned from the Uber case by companies operating under a subscription model–particularly SaaS and other technology companies?

First, prior to obtaining credit card information from a consumer, provide clear and very obvious notice of all the material terms of the subscription, including:

• the fact that the consumer is enrolling in a recurring paid subscription;
• the cost of the subscription;
• the frequency of the billing;
• how to cancel.

Second, make sure you have records that this notice was provided to the consumer.

Third, make sure that you have a very simple method for cancellation, i.e. the “click to cancel button,” and refrain from engaging in conduct that appears to frustrate cancellation.

Fourth, refrain from making promises or other statements that are not true about promotions or discounts.

These same lessons apply to any subscription or membership; however, SaaS and tech companies providing software to consumers via a subscription model should review their subscription practices today to ensure that they are in compliance with these best practices.   If you have questions or concerns about your company’s current subscription or membership practices, schedule a consultation today with The Prinz Law Office to discuss.