The Federal Trade Commission and 22 states filed a lawsuit Monday accusing Amazon of running a seven-year-long scheme to secretly inflate advertising costs for businesses on its platform.
The complaint claims Amazon’s Sponsored Products, Sponsored Brands, and Display ads were sold under a false second-price auction model, where advertisers were led to believe they would pay only slightly more than the next-highest bid. Instead, the FTC alleges Amazon introduced a hidden surcharge in 2019, using an internal mechanism it called a “soft reserve price” and a fake bidder to push prices higher. The result, regulators say, was that advertisers often paid their full winning bid—effectively converting the auction into a first-price system.
The FTC estimates the scheme affected more than 1 million brands and may have generated tens of billions in extra revenue for Amazon, which reported $68 billion in ad revenue last year. Amazon disputes the allegations, calling the lawsuit misguided and arguing its pricing system is transparent and properly explained to advertisers.
