An Amazon warehouse near Newport, Delaware. The Federal Trade Commission and 22 states have sued Amazon over an alleged scheme to inflate advertising prices. (Photo by Jacob Owens/Spotlight Delaware)
The Federal Trade Commission, alongside 22 states, has filed a lawsuit against Amazon. The claim alleges Amazon used artificial bids to inflate advertising costs, generating billions. This scheme involved an “invented auction participant” to raise ad placement prices, impacting advertisers significantly.
The complaint cites a former employee explaining the strategy allowed Amazon to charge prices surpassing competitive levels. FTC Chairman Andrew Ferguson highlighted how these inflated advertising prices burdened consumers across the U.S.
Operating for over seven years, this alleged scheme affected millions of brands and sellers. The lawsuit includes participation from attorneys general in states such as California, New York, and Washington, aiming for civil penalties and restitution.
Rhode Island Attorney General Peter Neronha remarked on Amazon’s prioritization of profits, compelling businesses to engage with them. The coalition seeks various remedies, including injunctive relief. Amazon, however, contests these allegations, stating the FTC misinterprets advertiser operations.
In a blog response, Amazon argued that the cost-per-click for ads remained stable when adjusted for inflation from 2019 to 2024. They claimed their pricing strategy awarded ads based on relevance rather than bid amount.
This legal action was filed in the U.S. District Court for the Western District of Washington, where Amazon’s headquarters are located. As the third-largest digital advertising player, Amazon trails Google and Meta with $68 billion in ad revenue in the previous year.
Previously, Amazon and the FTC settled for $2.5 billion over different allegations regarding Prime subscription enrollments. More details can be found on CNBC.
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