The Federal Trade Commission and a bipartisan coalition of 22 states sued Amazon on Monday for allegedly misleading advertisers over the past seven years by imposing “hidden surcharges.”The complaint, filed in the Western District of Washington, where the online retailer’s main headquarters is based, alleges Amazon secretly inflated the prices that roughly 1.2 million advertising customers were required to pay for placing ads on its shopping platform. This was done through the technology company’s advertising auction process.In a typical generalized-second-price auction, the winning bidder pays the amount of the second-highest bid instead of its own bid. Amazon allegedly deceived its advertisers by claiming the second-price model was used to determine advertising auction prices when, in reality, the price was inflated with a hidden surcharge.
In 2019, Amazon quietly changed its auction rules to include an undisclosed surcharge that would have to be paid by the online brands and sellers advertising on the platform.“This bait and switch betrayed advertisers’ trust and extracted billions of dollars at their expense,” FTC Chairman Andrew Ferguson said. “Amazon imposed this elaborate scheme on Americans for a simple reason: it wanted more money.”The plaintiffs estimated that more than $20 billion was “illegally extracted” from the e-commerce giant’s advertising customers.Amazon, considered the third-largest digital advertising business worldwide, amassed over $68 billion in advertising revenue last year. Much of this revenue came from ad sales for sponsored products.The FTC was joined in filing the lawsuit by the attorneys general of Alaska, Arizona, California, Colorado, Florida, Idaho, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maryland, Nebraska, New Jersey, New York, North Carolina, Oklahoma, Pennsylvania, Rhode Island, South Carolina, Vermont, and Washington. Texas filed a similar lawsuit on its own.Amazon responded to the federal lawsuit in a blog post, calling the legal action “misguided” while disputing the facts of the case.“The FTC’s claim fundamentally misunderstands how advertisers operate,” the company said. “Advertisers adjust bids based on real-world performance, not descriptions of auction mechanics. Even accepting the FTC’s flawed premise that advertisers do not adjust bids, we estimate they saved over $8 billion from 2021 to 2025 as a result of Amazon prioritizing ad relevancy over selecting ads on bid price alone.”CONNECTICUT SUES KALSHI TO BLOCK SPORTS-RELATED WAGERSMonday’s lawsuit is the latest action that the FTC has brought against Amazon.The company is heading to trial in February 2027 as part of a sweeping federal antitrust case led by the FTC and 17 states. The plaintiffs in that case accuse the defendant of undermining competition by inflating prices and exerting its “monopoly power” over third-party sellers.
