The Federal Trade Commission and 22 state attorneys general sued Amazon on Aug. 31, alleging the company used undisclosed surcharges to raise prices in its online search advertising auctions.
The complaint says Amazon concealed extra charges for more than seven years and that more than one million brands and sellers, including more than 500,000 small and midsize businesses, paid more than they were led to expect. Plaintiffs say the practice likely extracted tens of billions of dollars from advertisers and that those costs were often passed on to shoppers.
The states joining the FTC are Alaska, Arizona, California, Colorado, Florida, Idaho, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maryland, Nebraska, New Jersey, New York, North Carolina, Oklahoma, Pennsylvania, Rhode Island, South Carolina, Vermont and Washington.
According to the lawsuit, Amazon described its Sponsored Products auctions as second-price auctions, the industry standard in which the winner pays just above the next-highest bid. The complaint alleges Amazon instead charged advertisers their own winning bid close to 80 percent of the time, effectively turning the process into a first-price auction.
“When one of the world’s largest online retailers engages in unfair and deceptive conduct, the impact can be staggering,” said Chairman Andrew N. Ferguson. “Amazon has millions of advertising customers who were misled into paying significantly higher prices. These higher costs were largely passed on to American consumers. The FTC under President Trump won’t allow this deception to continue.”
The case seeks a permanent injunction, monetary judgment and other relief. Amazon has denied the claims in public comments, saying the FTC misunderstands how its ads work and that advertisers have saved money from relevancy-based ranking. The allegations have not been proven in court.