Amazon accused of inflating ad prices in federal and state lawsuit
The Federal Trade Commission and 22 state attorneys general have filed a lawsuit against Amazon, alleging the company secretly inflated advertising prices on its platform since 2019. The complaint claims Amazon manipulated its ad auctions to charge winning bidders more than the second-price rule would dictate, with costs passed to consumers. Amazon has denied the allegations, saying the FTC misunderstands advertiser behavior.
The lawsuit, filed by the FTC and 22 state attorneys general, centers on Amazon's advertising auction system, which operates on a "second price" model. Under this model, the winning advertiser should pay just one cent above the second-highest bid. The complaint alleges Amazon replaced this calculated price with a higher, internally determined "proxy" price to maximize its own revenue, a practice it claims has been in place since 2019.
This legal action follows a separate, recent settlement where Amazon paid $2.5 billion to resolve an earlier FTC lawsuit regarding its Prime subscription practices. Amazon has publicly disputed the new allegations, arguing that the FTC misunderstands its advertising operations. The company points to a significant drop in average winning bids for its Sponsored Products search ads between 2019 and 2024 as evidence that its pricing is competitive.
This lawsuit could have significant implications for the digital advertising market and consumer prices. If the allegations are proven, the practice may have systematically inflated costs for countless businesses that rely on Amazon's platform, and those increased operational costs could have been passed on to shoppers. The case may also prompt other tech platforms to scrutinize their own auction mechanics, potentially leading to broader industry changes regarding pricing transparency and fairness for advertisers.