Federal regulators and 22 state attorneys general have filed suit against Amazon, alleging the e-commerce platform manipulated its advertising auction system to overcharge merchants. The August 31 lawsuit, filed in U.S. District Court for the Western District of Washington, claims Amazon collected over $20 billion in unauthorized fees from approximately 1.2 million advertisers since 2019. The defendants include both large corporations and hundreds of thousands of smaller businesses who unknowingly paid inflated rates.
According to the complaint, Amazon publicly represented its ad pricing system as a competitive second-price auction, where winning bidders pay only slightly above the second-highest offer. However, regulators contend that beginning in 2018, Amazon began charging winners their own full bids rather than using competitor bids to set prices. Internal company documents cited in the lawsuit reveal employees understood advertisers trusted the platform to honor auction mechanics, with some merchants bidding as high as $1,000 based on that confidence.
The FTC alleges Amazon intentionally implemented increases gradually to avoid detection, monitoring advertiser responses before expanding the practice across three advertising products: Sponsored Products, Sponsored Brands, and Sponsored Display. Regulators also suggest consumers may have absorbed costs when businesses passed expenses to shoppers through higher prices. Amazon disputes the allegations, arguing its system considers ad relevance and claims to have saved advertisers $8 billion between 2021 and 2025, with winning bid prices declining significantly during that period.
The lawsuit seeks an end to the alleged practices, financial penalties, and restitution for affected advertisers. The case remains unresolved pending court proceedings.
Originally reported by Mashable →
About the Author
