FTC sues Amazon over secret ad surcharge scheme
The FTC and 22 states sued Amazon for quietly raising online ad auction prices for over 7 years, affecting 1 million brands and sellers.
Stock photo for illustration only, not from the actual event
- FTC and 22 states sue Amazon over ad surcharge allegations
- Auctions allegedly forced buyers to pay full bids nearly 80% of the time
- Over 1 million brands and sellers impacted by the practice
- Amazon defends its pricing systems, calling the lawsuit misguided
Amazon is facing a major legal challenge as the Federal Trade Commission (FTC) alongside 22 states filed a lawsuit accusing the tech giant of secretly overcharging businesses for advertising on its platform.
According to the complaint filed in court, Amazon spent more than seven years quietly increasing the prices advertisers paid through its online ad auctions. The alleged practice impacted more than 1 million brands and sellers, potentially generating tens of billions of dollars in extra revenue for the company.
The 22 states joining the FTC in this legal action include Alaska, Arizona, California, Colorado, Florida, Idaho, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maryland, Nebraska, New Jersey, New York, North Carolina, Oklahoma, Pennsylvania, Rhode Island, South Carolina, Vermont, and Washington.
Stock photo for illustration only, not from the actual event
The complaint details that this mechanism amounted to a shill bid, where Amazon manufactured a higher number for advertisers to beat instead of relying on actual competing bids. Consequently, the FTC claims Amazon charged Sponsored Products advertisers their full winning bid close to 80% of the time, effectively turning a second-price auction into a first-price one.
"Fundamentally misunderstands how advertisers operate."
Amazon
This lawsuit highlights ongoing regulatory scrutiny facing major technology platforms regarding transparency in digital marketplaces and advertising mechanisms, which constitute a vital revenue stream for digital giants.
In response, Amazon published a blog post describing the lawsuit as misguided and arguing that the complaint fundamentally misunderstands how advertisers operate. The company maintained that its auctions evaluate billions of bids across different formats, resulting in natural price variations, and that advertisers are properly informed about the pricing system.
Source: TechCrunch
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