FTC sues Amazon for allegedly overcharging advertisers on its platform

The Federal Trade Commission and 22 states on Monday accused retail giant Amazon of deceiving businesses by overcharging prices to advertise on its massive retail platform, pocketing billions for the company. The lawsuit claimed 1.2 million advertisers paid more than they realized because Amazon raised the minimum price to place ads without them knowing. It’s the third major lawsuit that the federal agency has filed against Amazon, which became the third-biggest ad platform in the United States in 2018. The Wall Street Journal first reported the lawsuit. Amazon sets its advertising prices using an auction system, in which companies bid on different types of ads and where they appear. In practice, the winning advertiser is only supposed to pay a cent more than the second-place bid. But the lawsuit claims that “in 2018, Amazon began secretly manipulating its auction results to increase its ad prices.” In actions such as an alleged hidden surcharge, Amazon “likely illegally extracted over 20 billion dollars” from 1.2 million customers, almost half of whom were small or medium-sized businesses. The FTC claimed these higher costs were eventually passed down to Amazon shoppers. In a 3,000-word statement to CNN, Amazon said it “strongly disagrees” with the “misguided” lawsuit. “The FTC’s claim fundamentally misunderstands how advertisers operate,” Amazon 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.” Amazon claims it shared its data with the FTC “on multiple occasions,” but “they have shown little interest in engaging with the facts and appear more focused on trying to secure some sort of monetary victory.” CNN has reached out to the FTC for comment. This is a developing story and will be updated.