Amazon Accused of Secretly Inflating Ad Prices Through Auction Manipulation

The Federal Trade Commission (FTC) and 22 state attorneys general have filed a lawsuit against Amazon, alleging that the e-commerce company secretly inflated the prices of its search advertising auctions for over seven years.

The FTC claims that Amazon's practices affected over 1 million brands and delivered tens of billions in revenue to its own business. The company allegedly used a 'soft reserve price' or 'hidden surcharge' within its second-price auction system, leading advertisers to pay substantially more than the actual bid amount.

According to internal documents quoted by the FTC, Amazon executives believed that disclosing this behavior could cause 'irrevocable damage to advertiser trust.' The company's response argues that the cost per click for Sponsored Product Ads remained flat when adjusted for inflation between 2019 and 2024, while conversion rates rose 24%.

This is the third FTC case against Amazon in recent years, following suits focused on its Prime subscription and a monopoly over online retail. Advertisers may face challenges in taking action due to Amazon's dominant place in the ecosystem.