The Federal Trade Commission and 22 state attorneys general have filed a lawsuit against Amazon, accusing the company of engaging in deceptive and unfair trade practices that “secretly inflated prices” in its online sear ch advertising auctions.
The lawsuit, filed Monday in U.S. District Court for the Western District of Washington, accuses Amazon of violating multiple federal- and state-level laws, including New York’s Fair Business Practices Act and California’s Unfair Competition and False Advertising statutes.
Amazon’s practices, says FTC Chairman Andrew N. Ferguson, has likely made the company tens of billions of dollars off “unwitting advertising customers.”
“When one of the world’s largest retailers engages in unfair and deceptive conduct, the impact can be staggering,” Ferguson said in a statement. “Amazon has millions of advertising customers who were misled into paying significantly higher prices. These higher costs were largely passed on to American consumers. The FTC under President Trump won’t allow this deception to continue.”
The attorneys general of at least 22 states—including Arizona, California, Maryland, New Jersey, New York, Pennsylvania, Texas, and Washington—are listed as co-plaintiffs in the complaint.
In a press release, California Attorney General Rob Bonta said that Amazon must be held accountable for its unlawful practices.
“For years, Amazon has misrepresented how it calculates the cost of advertising on its platform,” Bonta said. “Over the years, Amazon has rigged billions of ad auctions, inflating Amazon’s profits at the expense of Americans who rely on Amazon’s advertising to generate business. I’m proud to stand alongside the FTC and my colleagues across the nation in protecting our small and medium-sized businesses from being taken advantage of by this multi-trillion-dollar company.”
The lawsuit claims that Amazon told its advertising customers that the price of ads is set by “second price” auctions that rank participants based on a combination of their bid and their product’s relevance to shoppers’ searches; the winner of each auction is supposed to the “minimum amount necessary (e.g., one cent more) to beat the second-place bid.”
“However,” Bonta’s office says, “the complaint alleges that, in 2019, Amazon started to add surcharges on top of the second-place bid set by the auctions and thereby drove up the final price paid by the winning bidder and did not disclose this change to its digital advertising customers.”
“As described in the complaint, because Amazon understood that revealing the surcharges—and the fact that the auction was no longer a genuine second-price auction—would lead to significant backlash from its advertising customers, Amazon spent years concealing the changes from the public,” the FTC said in a press release. “For example, leading up to the high-volume days, Amazon carefully ramps up surcharges to disguise the fact that it is inflating prices. Amazon has repeatedly deployed such underhanded tactics to increase its surcharges to meet revenue targets.”
Sources
Attorney General Bonta Sues Amazon for Deceptive Digital Advertising Sales
Attorney General James Sues Amazon for Fraudulently Overcharging Advertisers More Than $20 Billion
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