The consumer watchdog is suing Amazon over allegedly having unfair contract terms for its Prime streaming service.

The Australian Competition and Consumer Commission (ACCC) claims Amazon had more than one million Australian annual subscribers on Prime contracts with five unfair terms which allowed unilateral changes between November 2023 and August 2025.

The lawsuit alleges one of those terms was relied on when it introduced ads to Prime in July 2024 which required subscribers to pay an additional $2.99 per month to remain ad-free.

ACCC Chair Gina Cass-Gottlieb said consumers were "left with no choice but to pay more".

"We allege that Amazon AU included multiple unfair terms in its contracts with Australian annual Prime subscribers, and it then relied on some of these terms to bring ads onto Amazon Prime Video," Ms Cass-Gottlieb said.

"Consumers who wanted to avoid ads were left with no choice but to pay more to maintain the service they'd initially signed up for."

Prime is one of Australia's most popular streaming services and has the rights to hit shows including Euphoria and Yellowstone.

The ACCC claimed Amazon's changes included being able to make adverse changes to its services without "any contractual entitlement to a pro rata refund or other meaningful redress," which was a significant power imbalance. 

The consumer watchdog also alleged that Amazon US helped to draft the contracts and that it was Amazon US that made the decision to introduce advertising to Prime Video globally.

"All businesses are required to balance rights and obligations in their standard form contracts with consumers to ensure they are fair," Ms Cass-Gottlieb said.

"Contraventions of unfair contract term protections are subject to significant penalties.

"We strongly encourage all businesses, particularly those offering subscriptions, to review their contracts to ensure they comply with the Australian Consumer Law."

The ACCC said it would seek penalties against Amazon as well as consumer redress and other costs.

The financial penalty imposed for unfair contract terms is whichever is the highest of $50 million, three times the value of the benefit obtained from the illegal conduct, or 30 per cent of adjusted turnover during the contract period.

In a statement, an Amazon Australia spokesperson said it was reviewing the case.

"We have cooperated with the ACCC throughout its investigation and remain focused on providing the best experience for our Australian customers."

Last month the consumer watchdog sued Amazon in a different case over allegations it sold kids unicorn backpacks on its online marketplace that failed to comply with mandatory button battery safety warnings.

It was the first Federal Court case taken by the ACCC against an online marketplace over alleged non-compliance with product safety standards.