FTC accuses Amazon of rigging ad auctions to overcharge advertisers by $20B
The FTC and 22 states have sued Amazon, alleging it secretly overcharged advertisers by manipulating ad auctions since 2019. The lawsuit claims Amazon replaced actual auction results with higher prices, extracting over $20 billion from about 1.2 million advertisers. Amazon denies the allegations, saying the FTC cherry-picked details.
The lawsuit centers on Amazon's shift from its long-standing generalized second-price auction model, which it had used since 2012. Beginning in 2019, the company allegedly introduced an internal mechanism called a "soft reserve price" that effectively inserted a fictional bidder into auctions, pushing final prices above what genuine competition would have produced. The FTC's investigation, launched in 2024, reviewed internal communications describing these as "hidden" surcharges.
Amazon's defense argues that the FTC relied on a small selection of simplified training materials rather than the full scope of its operations. The company maintains that its advertising system functioned fairly and that the allegations mischaracterize routine auction mechanics. The case, filed in Washington's Western District, seeks injunctive relief alongside financial penalties and restitution for affected advertisers.
This case could reshape how digital advertising platforms disclose pricing mechanisms to business customers. If the allegations hold, Amazon may face significant financial liability and mandatory changes to its auction systems, potentially affecting the roughly 1.2 million advertisers who rely on its platform. Smaller businesses, which often depend heavily on Amazon's marketplace for visibility, could be particularly vulnerable to opaque pricing practices. The outcome may also influence how other tech companies structure their ad auctions, as regulators increasingly scrutinize algorithmic pricing and hidden fees across the industry.