FTC Sues Amazon Over Alleged Ad Surcharge Scheme
The Federal Trade Commission (FTC) has filed a lawsuit against Amazon alongside 22 states, accusing the company of secretly increasing ad prices for businesses through its online auction system. The complaint alleges that Amazon manipulated advertising auctions by introducing hidden surcharges and fake bidders to drive up costs without informing advertisers. This practice reportedly affected over one million brands and generated tens of billions in additional revenue for Amazon. The lawsuit focuses on Amazon’s Sponsored Products, Sponsored Brands, and Display ads. According to the FTC, businesses were led to believe they would only pay slightly more than the second-highest bid — a “second-price” auction model. However, starting in 2019, Amazon allegedly changed this system without disclosure by adding an internal surcharge known as a 'soft reserve price,' effectively turning it into a first-price auction where advertisers paid their full bids nearly 80% of the time. Amazon has denied wrongdoing and called the lawsuit “misguided,” stating that its pricing mechanisms are transparent. The company reported over $68 billion in advertising revenue last year, highlighting the potential financial impact if these allegations hold true.
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Topics: advertising Amazon FTC lawsuit price manipulation