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FTC, 22 States Sue Amazon Over Hidden Ad Price Scheme
(MENAFN) The US Federal Trade Commission (FTC) and 22 states filed suit against Amazon on Monday, accusing the retail giant of secretly inflating prices in its online search advertising auctions.
Regulators allege the covert price hikes ran for more than seven years, driving up costs for over 1 million brands and sellers who advertised on the platform.
FTC Chairman Andrew N. Ferguson did not hold back in describing the fallout: "When one of the world's largest online retailers engages in unfair and deceptive conduct, the impact can be staggering." He added that Amazon "has millions of advertising customers who were misled into paying significantly higher prices" — costs the commission says ultimately trickled down to American consumers.
At the heart of the complaint is Amazon's so-called second-price auction model, which the company pitched to advertisers as a system in which winning bidders would pay just one cent more than the next-highest offer. Instead, the lawsuit alleges, Amazon frequently charged Sponsored Products advertisers their full winning bid — close to 80% of the time by recent estimates.
That figure marks a sharp climb: the share of advertisers paying their exact bid reportedly rose from between 30% and 40% in 2021 to roughly 80% by 2024, according to the complaint.
Internal company records cited in the suit indicate Amazon fabricated a phantom auction bidder to artificially drive prices upward — a tactic executives internally recognized as a reliable revenue driver, regulators say.
The complaint further alleges that Amazon went to considerable lengths to keep the practice hidden, fearing backlash from advertising customers if the scheme came to light.
The case was filed in the US District Court for the Western District of Washington.
Regulators allege the covert price hikes ran for more than seven years, driving up costs for over 1 million brands and sellers who advertised on the platform.
FTC Chairman Andrew N. Ferguson did not hold back in describing the fallout: "When one of the world's largest online retailers engages in unfair and deceptive conduct, the impact can be staggering." He added that Amazon "has millions of advertising customers who were misled into paying significantly higher prices" — costs the commission says ultimately trickled down to American consumers.
At the heart of the complaint is Amazon's so-called second-price auction model, which the company pitched to advertisers as a system in which winning bidders would pay just one cent more than the next-highest offer. Instead, the lawsuit alleges, Amazon frequently charged Sponsored Products advertisers their full winning bid — close to 80% of the time by recent estimates.
That figure marks a sharp climb: the share of advertisers paying their exact bid reportedly rose from between 30% and 40% in 2021 to roughly 80% by 2024, according to the complaint.
Internal company records cited in the suit indicate Amazon fabricated a phantom auction bidder to artificially drive prices upward — a tactic executives internally recognized as a reliable revenue driver, regulators say.
The complaint further alleges that Amazon went to considerable lengths to keep the practice hidden, fearing backlash from advertising customers if the scheme came to light.
The case was filed in the US District Court for the Western District of Washington.
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