FTC sues Amazon over alleged secret ad price markups
The US Federal Trade Commission and 22 state attorneys general are suing Amazon, alleging it secretly manipulated ad auctions to overcharge advertisers for years. Amazon denies the claims.
The Federal Trade Commission, joined by 22 state attorneys general, has filed a lawsuit against Amazon, alleging the company used a secret surcharge to inflate advertising prices on its website and app. FTC chairman Andrew Ferguson said in a blog post that the higher advertising costs were largely passed on to American consumers. The complaint alleges Amazon violated the FTC Act and more than a dozen state laws.
The lawsuit comes almost a year after Amazon agreed to pay $2.5 billion to settle an earlier FTC case over its Prime subscription practices.
How the alleged manipulation worked
In Amazon's "second price" ad auctions, the winning bidder is meant to pay only one cent more than the second-highest bidder. But the FTC alleges that since 2019, Amazon has manipulated these auctions: after determining the winning and second-place bidders, the company replaced the auction-determined price with a higher one designed to boost its own profits, reducing the cost efficiency of advertisers' campaigns.
The complaint quotes Amazon Ads' senior vice president explaining internally that the auctions' "second price isn't set by an actual bidder, but rather by" Amazon, through a "proxy 2nd price" the company calculates itself. The FTC estimates this practice has extracted over $20 billion from advertisers.
Amazon has called the lawsuit misguided, saying that between 2019 and 2024 the average winning bid for Sponsored Products search ads fell by 50%. The company also disputed the claim that the higher advertising costs were passed on to consumers.
