The Federal Trade Commission (FTC) and a bipartisan coalition of 22 states have sued Amazon, alleging the company secretly overcharged more than 1 million advertisers by manipulating the online auctions used to determine advertising prices.
According to the lawsuit filed Monday in Washington state, Amazon’s alleged advertising auction practices may have generated approximately $20 billion in additional profits from advertisers since 2019.
“To increase profits, Amazon overwrites actual auction results and replaces them with higher prices set by Amazon,” the FTC and states alleged in the complaint.
Amazon strongly denied the allegations, telling the BBC that it disagrees with the premise of the case and considers the lawsuit’s claims false.
The FTC and state attorneys general also argue that Amazon’s alleged advertising practices could harm consumers because advertisers may pass higher marketing costs on to shoppers through increased product prices.
“Consumers are suffering, have suffered, and will continue to suffer significant harm as a result,” the complaint stated.
Amazon rejected that argument, saying the FTC was inaccurately portraying the lawsuit as a case about raising prices for consumers.
Amazon shares fell following news of the antitrust lawsuit, closing 2.5% lower on Monday.
Brands and sellers compete for Amazon Sponsored Products and Sponsored Brands placements, which appear when shoppers search for products using keywords on the company’s e-commerce platform.
These advertising placements are awarded through online auctions, with advertisers competing to have their products displayed prominently in search results.
The complaint alleges that Amazon misled advertisers by secretly charging higher fees in auctions described as “second-price” auctions. Under that model, the winning advertiser generally expects to pay one cent more than the next-highest bid.
However, regulators claim Amazon charged Sponsored Products advertisers based on its own winning bid nearly 80% of the time, rather than using the second-highest bid as the pricing basis.
The lawsuit alleges that Amazon changed its approach because executives were dissatisfied with the amount of revenue generated through its advertising auctions.
Amazon responded that the FTC “fundamentally misunderstands how advertisers operate.”
“Advertisers adjust their bids based on actual performance, not a description of how the auction works,” Amazon said.
The company added that the average bid price for Sponsored Products search ads fell by 50% between 2019 and 2025. Amazon also said approximately 92% of ads placed did not win with the highest bid.
Amazon has faced scrutiny from the FTC and other consumer protection agencies before.
In a separate case last year, the company settled FTC allegations that it enrolled millions of consumers in Amazon Prime without their consent and made the cancellation process intentionally difficult.
Amazon agreed to pay $2.5 billion to resolve that lawsuit, including civil penalties and refunds for affected consumers.
Source: www.bbc.co.uk