Amazon is being sued by the US Federal Trade Commission and 22 state attorneys general over allegations that it secretly inflated the price of advertising on its website and app.
The complaint claims Amazon manipulated its advertising auctions to charge more than the price generated by the bidding process, a practice the authorities say may have extracted more than $20 billion from advertisers without their knowledge.
Under Amazon’s “second price” auction system, the successful bidder should generally pay only one cent more than the second-highest bid. The FTC alleges that this changed from 2019, when Amazon Ads began replacing the auction price with a higher figure intended to increase the company’s profits.
The regulator alleges that the additional costs were largely passed on to consumers through higher prices. FTC chairman Andrew Ferguson said in a blog post that Amazon had violated the FTC Act as well as more than a dozen state laws.
According to the complaint, Amazon internally referred to the figure used to replace the auction result as a “proxy 2nd price”. The filing quotes Amazon’s senior vice-president responsible for advertising as saying: “the second price isn’t set by an actual bidder, but rather by” Amazon.
Amazon has rejected the allegations, describing the case as “misguided”. In a company blog post, it said the average winning bid for Sponsored Products search adverts fell by 50% between 2019 and 2024.
The company also disputed the FTC’s claim that the alleged increase in advertising costs was passed on to shoppers, though the lawsuit argues that advertisers’ higher costs reduced the efficiency of their campaigns and contributed to increased prices.
The case comes less than a year after Amazon agreed to pay $2.5 billion to settle a separate FTC lawsuit concerning its Prime subscription practices.
