Amazon Accused of Manipulating Ad Auctions to Inflate Revenue

The Federal Trade Commission (FTC) and 22 US states have accused Amazon of engaging in deceptive practices, secretly driving up prices for advertisers in its online search advertising auctions. According to a 181-page indictment, Amazon has overcharged 1.2 million advertising customers by manipulating the auctions since 2019.

Amazon claims to use a 'second price' auction, where the highest bidder pays only one cent more than the runner-up. However, in practice, Amazon charged its sponsored products advertisers their own winning bid close to 80% of the time, effectively converting its auction into a first-price auction.

The plaintiffs claim that Amazon did this because it was unhappy about how much revenue its advertising auctions were generating. They're suing Amazon to put a stop to these alleged unfair business practices and are seeking damages.