Amazon Faces Allegations of Deceptive Overcharging in FTC Lawsuit

The Federal Trade Commission (FTC) and 22 state attorneys general have filed a lawsuit against Amazon, accusing the tech giant of employing a “secret ad surcharge” to inflate advertising prices on its platform. FTC chairman Andrew Ferguson stated in a recent blog post that these increased advertising costs were ultimately passed on to American consumers. The complaint alleges that Amazon’s actions violated the FTC Act and numerous state laws. This legal action comes on the heels of Amazon’s $2.5 billion settlement with the FTC last year regarding Prime subscription practices.

In Amazon’s ad auctions, known as “second price” auctions, the winning bidder is typically required to pay just one cent more than the second-highest bidder. However, the FTC’s complaint alleges that Amazon has been manipulating these auctions since 2019.

According to the complaint, Amazon Ads, the company’s advertising arm, has been setting higher prices for advertising placements after the auctions have concluded. Instead of abiding by the auction-determined prices, Amazon replaces them with inflated prices to boost its own profits, thereby reducing the cost efficiency of advertisers’ campaigns. This practice was reportedly endorsed internally by Amazon’s Senior Vice President overseeing Amazon Ads, who stated that Amazon calculates a “proxy 2nd price” rather than letting actual bidders determine the second price.

The complaint estimates that this scheme has unlawfully extracted over $20 billion from Amazon’s advertising customers. In response, Amazon published a blog post refuting the FTC’s claims, labeling the lawsuit as “misguided.” Amazon asserted that, contrary to the allegations, the average winning bid for Sponsored Products search ads actually decreased by 50% from 2019 to 2024. Amazon also disputed the assertion that higher advertising prices were shifted to consumers.