WASHINGTON (Diya TV) — The Federal Trade Commission and 22 states sued Amazon on Wednesday, accusing the company of using deceptive practices to increase advertising prices on its online marketplace.
The lawsuit alleges Amazon secretly added charges to its advertising auctions while continuing to describe the system as a “second price” auction, in which the winning advertiser typically pays slightly more than the second-highest bid.
According to the complaint, Amazon often charged advertisers their full winning bids instead. For Sponsored Products ads, the FTC said the share of auctions in which advertisers paid their full bids increased from about 30% to 40% in 2021 to about 80% in 2024.
The FTC alleges Amazon changed its auction system in 2019 by introducing an undisclosed charge referred to internally as a “soft reserve price.” The agency said the mechanism increased advertising costs beyond what competing bids alone would have produced.
The complaint also alleges Amazon used additional hidden pricing mechanisms, including what the FTC called an “invented auction participant” and a “proxy 2nd price,” to calculate advertising costs.
According to the FTC, Amazon increased some of those charges around major shopping events, including Prime Day and Black Friday, and gradually raised them in an effort to avoid drawing advertisers’ attention.
The agency alleges Amazon knew businesses might lower their bids if they understood how the auction system worked and therefore withheld information about the changes.
The FTC said the practices may have cost advertisers tens of billions of dollars over more than seven years. More than 1 million brands and sellers used Amazon’s advertising system during that period, including more than 500,000 small and medium-sized businesses.
Amazon’s advertising business includes Sponsored Products, Sponsored Brands and Display Ads, which appear across its website and mobile app.
FTC Chairman Andrew N. Ferguson said the alleged conduct affected millions of advertisers and could also affect consumers if businesses pass higher advertising costs on through product prices.
The lawsuit was filed in the U.S. District Court for the Western District of Washington. Attorneys general from 22 states, including California, Florida, New York and Washington, joined the case.
The FTC voted 2-0 to authorize the lawsuit.
Amazon will have an opportunity to respond in court. The allegations have not been proven.
