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The FTC and 22 state attorneys general are suing Amazon for allegedly using a \u201csecret ad surcharge\u201d to drive up prices for ads on its website and app. FTC chairman Andrew Ferguson claims in a blog post on the lawsuit that the higher advertising prices \u201cwere largely passed on to American consumers.\u201d According to the complaint, Amazon violated the FTC Act and over a dozen state laws. This lawsuit comes almost a year after Amazon agreed to pay $2.5 billion to settle an earlier FTC lawsuit over Prime subscription practices.<\/p>\n<\/div>\n
In Amazon\u2019s \u201csecond price\u201d auctions for ads on its platform, the winning bidder is supposed to only pay one cent more than the second-highest bidder. However, the FTC\u2019s complaint alleges that Amazon has been \u201cmanipulating\u201d the auctions since 2019:<\/p>\n<\/div>\n
\nAmazon\u2019s advertising organization (\u201cAmazon Ads\u201d) decided to set and charge customers higher prices for advertising placements itself. After Amazon runs its ad auctions and determines the winning and second-place bidders, it then replaces the price determined by the auction with a higher price designed to maximize Amazon\u2019s profits and decrease the cost efficiency of its advertisers\u2019 campaigns. As explained internally by Amazon\u2019s Senior Vice President in charge of Amazon Ads, in Amazon\u2019s auctions \u201cthe second price isn\u2019t set by an actual bidder, but rather by\u201d Amazon in the form of a \u201cproxy 2nd price that we calculate.\u201d<\/p>\n<\/blockquote>\n<\/div>\n
\nThe complaint claims this practice \u201chas likely illegally extracted over 20 billion dollars from [Amazon\u2019s] unwitting advertising customers.\u201d Amazon responded in a blog post saying the FTC\u2019s lawsuit is \u201cmisguided\u201d and claiming that \u201cfrom 2019 to 2024, the average winning bid for Sponsored Products search ads fell 50%.\u201d It also disputed the FTC\u2019s claim that higher advertising prices were passed on to consumers.<\/p>\n<\/div>\n