Amazon is Being Taken to Court For Introducing Ads to Prime Video. The World Will Be Watching

This article is republished from The Conversation under a Creative Commons license. Read the original article.

By Jeannie Marie Paterson, The University of Melbourne

When Amazon started showing ads to its Prime Video subscribers, annoyed TV viewers complained to the consumer watchdog. Now the case is headed for the Federal Court – and already attracting international interest.

The Australian Competition and Consumer Commission (ACCC) has accused Amazon Australia of breaching Australian consumer law by “making negative changes” to contract terms for Prime subscriptions, which then affected more than 850,000 people when Amazon introduced advertising to Prime Video.

Amazon Prime Video is Australia’s second most popular streaming service, only behind Netflix.

The ACCC says Amazon US was also “knowingly concerned” in what happened in Australia.

This court case is part of a campaign by the ACCC to enforce the protections in the Australian Consumer Law against big companies – such as Amazon, Coles and Woolworths – involving individually small, but widespread, losses to consumers. Just last month, the ACCC launched a separate court case against Amazon for allegedly unsafe children’s backpacks.

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The ACCC is increasingly testing the boundaries of what it can enforce under Australian Consumer Law. But what exactly does that law say on this issue – and what defence might Amazon have?

What’s the ACCC alleging?

The ACCC alleges that between November 2023 and August 2025, Amazon Australia’s Prime contracts contained terms allowing Amazon to make changes to the service and conditions of supply, providing consumers were notified of any adverse changes.

The ACCC alleges Amazon relied on these legal terms to:

• introduce ads to Prime Video in July 2024

• then charge subscribers A$2.99 per month to remain ad free, in addition to their upfront monthly or yearly fees.

At the time, more than 850,000 Prime subscribers had paid an annual fee for their subscription, which included access to Prime Video.

So the ACCC argues those subscribers were then left with “a degraded Prime Video service for the balance of their subscription”.

It also alleges consumers who chose to cancel were not offered “a pro rata refund or other meaningful redress”, which it argues made the terms of the Amazon contract unfair.

Significantly, the ACCC also claims Amazon US was involved: that it made the decision to introduce advertising to Prime Video globally, then helped implement that decision in Australia.

What Amazon has said and potential penalties

An Amazon Australia spokesman said in a statement the company was reviewing the ACCC’s case:

The ACCC is seeking penalties against both Amazon Australia and Amazon US, as well as consumer redress and costs. In this case, the maximum financial penalty would be whichever is highest out of:

• A$50 million

• three times the value of the benefit obtained from the conduct, or

• 30% of adjusted turnover during the breach period.

Why this case is legally tricky

I have argued for years that “unilateral variation clauses” – giving the supplier an unfettered discretion to change the terms of service in a contract – are inherently unfair.

The whole purpose of entering into a contract is to lock in a promise to supply goods or services on agreed terms.

If the supplier – in this case Amazon – can change the terms at any time, in any way it likes, it undermines the whole point of making a contract.

That’s been my view. But the ACCC’s official advice to business on contracts has taken a different position – which might give Amazon a defence.

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Amazon appears to have followed official guidance

The ACCC’s own website currently suggests that a fair contract should allow consumers to terminate without a “penalty” if they don’t like a “unilateral change” from the supplier. This guidance does not explicitly mention needing to offer pro rata refunds for people cancelling contracts.

The ACCC's example of an unfair contract term

Business A provides standard form 3 year contracts for broadband services. A term of Business A’s contract allows it to change the price for the services at any time during the 3 years. The customer is not allowed to end the contract, even if they don’t agree to the price increase.

Business B provides standard form 3 year contracts for broadband services. A term of Business B’s contract allows it to change the price for the services at any time during the 3 years. However, another term of Business B’s contract allows customers who don’t agree to a price increase to end the contract without any penalty.

The term that allows Business A to change prices during the contract term is likely to be an unfair contract term. However, the similar term in Business B’s contract is likely to not be an unfair contract term because the other term allowing early termination without penalty balances it.

This could be part of Amazon’s defence in the Federal Court.

Amazon could argue its contract terms at the time were technically consistent with the ACCC’s own guidance: customers were given notice of adverse changes and could terminate at any time in response.

The question for the Federal Court to decide will be whether that was enough – or whether pro rata refunds for Prime Video viewers wanting to cancel their subscription were essential to make the contract terms “fair” under consumer law.

Interestingly, I checked my Amazon Prime Video subscription and found a pro rata refund is now offered if I terminate following an adverse change of terms. The ACCC has also pointed out that change in its case filing against Amazon.

This court case will not just be closely watched here in Australia. With Amazon US also involved, within hours of the ACCC’s announcement it had already begun to make international headlines.

The case will also be followed particularly closely in other countries with similar laws to Australia’s against unfair contract terms, such as the United Kingdom and the European Union.

[KS]

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