In brief
The Federal Trade Commission and a bipartisan coalition of 22 states filed a lawsuit alleging that Amazon secretly inflated online advertising prices, extracting more than $20bn from advertisers since 2019. The complaint claims Amazon overridden auction results with higher bids, harming both companies and consumers as extra costs were passed onto shoppers. Amazon denies wrongdoing, calling the suit misguided, and states that its ad mechanics are fair. The lawsuit follows Amazon’s previous $2.5bn FTC settlement over Prime subscription practices. Shares fell 2.5% after the announcement, underscoring investor unease.
The Federal Trade Commission, joined by a bipartisan group of 22 states, filed a lawsuit on Monday alleging that Amazon secretly overcharged more than one million advertising customers by manipulating the online auction system it uses to set ad prices on its e‑commerce platform. The complaint claims Amazon’s practices have collectively netted the company roughly $20bn (£14.8bn) from 2019 to the present.
According to the suit, Amazon overrides and replaces the actual auction results with higher prices set by the company, effectively raising its profit margins. “Amazon overrides and replaces the actual auction results with higher prices set by Amazon to increase its profits,” reads one section of the complaint filed by the state of Washington.
Amazon has responded by strongly disagreeing with the premise that it misled advertisers, calling the case “misguided.” In a statement, the company stressed that its advertising auction mechanics are not based on the highest bid but on a “second‑price” model, where advertisers typically pay only one cent more than the next highest bidder.
The lawsuit also argues that consumers are harmed because the higher advertising costs are eventually passed onto shoppers. “Consumers are suffering, have suffered, and will continue to suffer substantial injury,” the complaint asserts. Amazon disputes this, insisting that the FTC fundamentally misunderstands how advertisers operate.
Following the announcement, Amazon’s shares fell 2.5% on the Monday market close.
Amazon’s advertising model places “Sponsored Product” and “Sponsored Brands” ads for sellers when buyers search for keywords on the platform. These placements are auctioned to the highest bidder, yet the lawsuit claims Amazon has been charging advertisers an average winning bid close to 80% of the time. Amazon argues that average winning bids fell 50% from 2019‑2025 and that roughly 92% of placed ads are not awarded to the highest bid.
The company previously settled a case with the FTC over Prime subscription practices for $2.5bn, including penalties and consumer refunds.
Source: BBC News – Lucy Jamali
