The Federal Trade Commission filed the lawsuit on Monday. Amazonalleging that the e-commerce giant “secretly and systematically overcharged” advertisers on its platform by manipulating pricing and auction systems.
The lawsuit, joined by 22 state attorneys general, alleges that Amazon may have taken more than $20 billion from advertisers through “hidden surcharges” dating back to auction rule changes that took effect in 2019.
“Amazon has millions of advertising customers who were misled and forced to pay significantly higher prices,” FTC Chairman Andrew Ferguson said in a statement. “These higher costs were primarily passed on to American consumers.”
Amazon said in a blog post that the FTC’s lawsuit is “misguided” and that the complaint “fundamentally misunderstands how advertisers operate.” The company added that the authorities’ case contains no evidence of consumer price increases.
“We provide advertisers with auction and pricing guidance for the key tools they use to manage their campaigns, and we will continue to update that guidance,” the company said. “We look forward to litigating the case in court.”
The company said its auction system saved advertisers $8 billion between 2021 and 2025 at no extra cost.
The complaint, filed in the U.S. District Court for the Western District of Washington, focuses on Amazon’s sponsored product ads, brand ads, and display ads that run alongside search results on its vast web store.
Amazon has built the world’s third-largest digital advertising business, coming in second place. google and meta. The company generated more than $68 billion in advertising revenue last year, much of it from sponsored product ad sales.
Third-party sellers who sell products on Amazon’s marketplace have recently criticized the site’s soaring advertising costs, including a series of recent policy changes, with some large sellers withholding ad spending in a boycott.
The company has traditionally used a “second-price” auction system, telling advertisers that they would “pay only the lowest bid needed to win,” the complaint says, citing Amazon’s own marketing materials.
In its complaint, the FTC alleges that Amazon changed its auction rules without notice in 2019 by adding an undisclosed additional fee called a “soft reserve price,” which led to higher advertised prices.
“Amazon made these secret changes to its auctions because it was dissatisfied with the revenue its advertising auctions were generating,” the agency said in its complaint, citing internal communications between Amazon’s advertising executives.
The FTC said executives at one exchange admitted to using “manufactured auction participants” to inflate prices.
The FTC and states allege that Amazon’s actions violate federal and state consumer protection laws and are seeking civil penalties, restitution, and unspecified other damages.
This is the latest example of Amazon being targeted by the FTC. Last September, Amazon reached a $2.5 billion settlement with the agency to resolve a separate investigation into its Prime membership program.
The company is also scheduled to go to trial next year in a lawsuit brought by the FTC and 17 states that accuses it of exercising “monopoly power” to jack up prices, crush third-party sellers and reduce quality for shoppers. Amazon denies wrongdoing.
