Businesses advertising on Amazon may have paid billions of dollars more than its auctions appeared to require, according to a lawsuit filed by the US Federal Trade Commission and 22 state attorneys general.
The case centers on a pricing mechanism that regulators describe as a “secret ad surcharge.” In Amazon's second-price auctions, the advertiser submitting the highest bid is generally supposed to win while paying just one cent more than the second-highest bid. The complaint alleges that, since 2019, Amazon has overridden that auction result with a higher price calculated by the company itself.
According to the lawsuit, Amazon used this internally generated “proxy” price to increase its profits and reduce the cost efficiency of advertisers' campaigns. Regulators claim the practice may have extracted more than $20 billion from advertising customers who were unaware of the adjustment.
FTC chairman Andrew Ferguson also argued that the additional advertising costs were largely passed on to American consumers. The complaint accuses Amazon of violating the FTC Act as well as more than a dozen state laws.
Amazon rejected the allegations, calling the lawsuit misguided and saying it misunderstands advertisers' behavior. The company stated that the average winning bid for Sponsored Products search advertisements fell by 50 percent between 2019 and 2024. It also disputed the assertion that consumers ultimately bore the alleged higher costs.
The lawsuit follows another major dispute between Amazon and the FTC. Nearly a year earlier, the company agreed to pay $2.5 billion to settle a case concerning its Prime subscription practices.