The Federal Trade Commission (FTC) has filed a lawsuit accusing Amazon of illegally manipulating advertising prices and defrauding businesses out of billions of dollars. The complaint, filed Monday in Seattle federal court, alleges that the e-commerce giant secretly manipulated ad auctions to inflate prices charged to its approximately 1.2 million advertising customers.
The lawsuit asserts that since 2019, Amazon has "secretly and systematically overcharged" advertisers by overriding auction results with higher prices set by Amazon itself, thereby increasing its profits. A bipartisan coalition of 22 state attorneys general, including those from California, Florida, New York, Louisiana, and Iowa, has joined the FTC in the action.
According to the FTC, the alleged scheme began in 2018 when Amazon started placing its own bids in the advertising auctions it conducted. These bids, described as "soft reserve" bids, raised the minimum price for advertisers seeking to gain visibility on Amazon's platform without competing advertisers being aware of Amazon's participation. This practice allegedly increased pay-per-click ad costs by as much as 50% on major shopping days.
Amazon, the third-largest digital advertising platform globally behind Google and Meta, generated $68 billion from advertising last year. The FTC claims that Amazon took affirmative steps to conceal this pricing strategy from its customers.
This is not the first legal action taken by the FTC against Amazon. Last year, the company agreed to a $2.5 billion settlement with the agency over charges that it had improperly enrolled customers into its Prime subscription service. The current lawsuit alleges that the digital ad deception began under founder and executive chairman Jeff Bezos.
Among the businesses allegedly affected by this scheme are approximately 500,000 small and medium-sized businesses. The lawsuit draws parallels to previous antitrust actions against other major technology companies, such as Google, which was found to be a monopolist by a federal judge.
Amazon's shares saw a 3% decline, falling to approximately $259 on Monday afternoon following the lawsuit's announcement. The company had not immediately responded to a request for comment.