For businesses selling on Amazon, winning an advertising auction may have come with a hidden price.The Federal Trade Commission and 22 states sued Amazon on Aug. 31, accusing the retail giant of quietly manipulating its ad auctions, secretly inflating ad prices, and collecting more than $20 billion in improper charges.The case involves about 1.2 million advertisers, including hundreds of thousands of small and midsize businesses. Regulators say many paid more than expected without realizing it.
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Filed in the U.S. District Court in the Western District of Washington, the FTC complaint states:Since 2019, Amazon.com, Inc. ('Amazon') has secretly and systematically overcharged its approximately 1.2 million advertising customers by manipulating the 'auctions' that it uses to set the price of ads on its platform. Amazon represents, and advertisers believe, that competitive auctions set the prices for advertising on its leading e-commerce website. But, in reality, Amazon overrides and replaces the actual auction results with higher prices set by Amazon to increase its profits. For years, Amazon has secretly inflated the auction prices for three of its advertising products: Sponsored Products, Sponsored Brands and Sponsored Display.Amazon allegedly told advertisers it generally used a "second-price" auction. Under that system, the winner pays slightly more than the second-highest bid — not the full amount it offered. But regulators say that isn’t always what happened. According to the lawsuit, Amazon began changing the process in 2018. Instead of setting the price based on the runner-up’s bid, the company often charged winners according to their own, higher bids. The FTC says that difference amounted to a hidden surcharge.This is your final chance to guess what Apple will release in September in our Big Guessing Game: Apple edition. Enter now for a chance to win an Apple Watch!Internal discussions cited in the complaint suggest Amazon knew advertisers believed they were participating in true second-price auctions. In one 2023 document, employees reportedly noted that some advertisers submitted bids as high as $100 or $1,000 because they trusted Amazon not to charge the full amount.
