● Covered by 3 sources · 3 reportsHigh impact3 negative
FTC and 22 States Sue Amazon Over Alleged Secret Ad Surcharge Scheme
Key points
- FTC and 22 states sued Amazon on Monday.
- Lawsuit alleges Amazon secretly overcharged advertisers since 2019.
- Over one million brands and sellers were affected.
- Alleged scheme may have generated $20 billion for Amazon.
- Amazon denies allegations, stating its systems saved advertisers money.
Lawsuit Filed Against Amazon
The Federal Trade Commission (FTC) and a coalition of 22 U.S. states have initiated a lawsuit against Amazon, accusing the e-commerce giant of secretly inflating advertising costs for businesses on its platform. The complaint, filed on Monday, alleges that Amazon systematically overcharged advertisers through its online ad auctions for more than seven years, with a significant change to auction rules taking effect in 2019.
Allegations of Manipulated Ad Auctions
The lawsuit centers on Amazon’s Sponsored Products, Sponsored Brands, and Display ads. According to the FTC, Amazon informed over 500,000 small and medium-sized businesses that it operated a “second-price” auction where the winning advertiser would pay one cent more than the next-highest bid. However, the complaint alleges Amazon overrode actual auction results with higher prices to increase its profits, potentially generating tens of billions of dollars in additional revenue, with some reports citing over $20 billion since 2019. The FTC claims these higher costs were largely passed on to American consumers.
The 22 states joining the FTC in the lawsuit 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.
Amazon's Response
Amazon has strongly refuted the allegations, describing the FTC's lawsuit as "misguided" and stating that it "fundamentally misunderstands how advertisers operate." The company claims its auction systems have saved advertisers $8 billion and that it has provided guidance about its auctions and pricing. Amazon also stated that the lawsuit lacks evidence of consumer price increases and expressed its intent to present its case in court.
Potential Impact
The lawsuit challenges Amazon's advertising practices, which could lead to changes in how the company operates its ad auctions and impact its substantial advertising revenue. The FTC and the states argue that both advertisers and consumers have suffered substantial injury as a result of the alleged scheme.
✨ This summary was generated by AI from the outlets' reporting listed below. It is not independently verified and may contain errors — check the original sources. How BrevFeed works →
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How outlets covered it
The US Federal Trade Commission (FTC) and 22 states have filed a lawsuit alleging Amazon secretly overcharged over a million advertising customers by manipulating online ad auctions, potentially netting the company $20 billion since 2019. This lawsuit claims Amazon overrode auction results to set higher prices, impacting both advertisers and consumers through increased costs.
The Federal Trade Commission (FTC) has sued Amazon, alleging the company secretly overcharged advertisers on its platform by manipulating its pricing and auction systems since 2019. The lawsuit, joined by 22 state attorneys general, claims Amazon may have reaped over $20 billion from these "hidden surcharges," which the FTC states were largely passed on to consumers. Amazon denies the allegations, calling the lawsuit "misguided" and stating its systems have saved advertisers money.
The Federal Trade Commission (FTC) and 22 states have filed a lawsuit against Amazon, alleging the company secretly increased advertising costs for businesses on its platform since 2019. This action claims Amazon used a hidden "soft reserve price" and an "invented auction participant" to inflate ad prices, potentially generating billions in additional revenue and impacting over a million brands. The lawsuit challenges Amazon's advertising practices, which could lead to significant changes in how the company operates its ad auctions and impact its substantial advertising revenue.