FTC and 22 States Sue Amazon Over Advertising Auctions

The Federal Trade Commission (FTC) and 22 states have sued Amazon over its handling of advertising auctions. The FTC says Amazon secretly inflated its rates for more than six years, making billions of dollars by adding hidden surcharges to ad auctions.

According to the regulator, advertisers unknowingly overpaid for sponsored product placements and other ads on Amazon’s platform. The lawsuit alleges that the practice was known within Amazon, even after multiple employees raised concerns.

Some details of the lawsuit have been redacted. However, it quotes internal documents in which Amazon employees questioned the company’s auction pricing. One memo acknowledged that undisclosed reserve prices increased short-term revenue but predicted they would hurt Amazon in the long run.

The FTC says the alleged overcharging ultimately led to higher prices on Amazon’s platform, hurting American consumers. Amazon disputes that claim and says the lawsuit cites no evidence of consumer price increases.

The company called the FTC’s action misguided and said the regulator fundamentally misunderstands how advertising auctions work. Amazon also said that, after reviewing approximately 1.5 million pages spanning six years, the FTC relied on a handful of simplified communications to allege a companywide effort to deceive. The company called that allegation patently false.