The Federal Trade Commission filed a bombshell lawsuit against Amazon, alleging that the e-commerce giant illegally reaped tens of billions of dollars by manipulating the prices businesses paid to advertise on its website. Amazon should pay dearly.
The explosive, 181-page complaint filed is joined by a bipartisan group of 22 attorneys general representing California, Florida, New York, Louisiana and Iowa, who allege that Amazon bilked advertisers by stealthily placing its own bids in ad auctions to jack up prices. Advertisers were allegedly duped out of $20 billion over seven years beginning in 2018 because of the inflated ad prices, according to the complaint by the FTC, chaired by Andrew Ferguson. “Since 2019, Amazon.com has secretly and systematically overcharged its approximately 1.2 million advertising customers,” according the lawsuit. “Amazon overrides and replaces the actual auction results with higher prices set by Amazon to increase its profits.”
The suit was filed in Seattle federal court and is the third such action brought the agency against the e-commerce giant. Last year, Amazon agreed to a $2.5 billion settlement with the FTC over charges that it knowingly trapped customers into paying for Prime subscriptions. Amazon is the third-largest digital-ad platform behind Google and Meta, earning $68 billion from ads last year. The FTC claims that Amazon’s strategy of illegally raising prices started when it entered its own bids in the auctions it ran to solicit advertising, the suit alleges. The advertisers are competing for exposure on Amazon’s platform to position their brand at the top each time a shopper searches for a product.
The so-called “soft reserve” Amazon bids raised the auction floor for bids, but the other competing merchants were not aware that Amazon submitted a bid to goose the results.The complaint alleges that Amazon’s strategy raised the pay-per-click ad cost by 50% on major shopping days, according to the Wall Street Journal. In recent years, Amazon has intervened in auctions to raise the minimum price 70% to 80% of the time, according to FTC officials. “Amazon gave its customers no notice of this change and took affirmative steps to conceal it,” according to the lawsuit.
Amazon said its ad practices had no impact on consumers and claimed that it properly disclosed how its auctions work. It said its ad technology has improved to help advertisers better attract customers and maximize sales, thus increasing its value. “After reviewing approximately 1.5 million pages spanning six years, the FTC leans on a handful of simplified communications to allege a companywide effort to deceive,” Amazon said. “That is patently false.”