Amazon Faces Lawsuit Over Secretly Inflated Ad Auction Prices

The Federal Trade Commission (FTC) and 22 state attorneys generals have filed a lawsuit against Amazon, alleging that the company secretly overcharged advertisers in its search ad auctions for more than seven years. The suit was filed in the Western District of Washington.

According to the complaint, Amazon added a 'soft reserved price' to its auction system, which effectively created an invented bidder that pushed up prices. This meant that instead of paying just one cent more than the next highest bidder, advertisers ended up paying close to their own bid 80% of the time by 2024.

The lawsuit claims that tens of billions of dollars were extracted from over a million brands and sellers, including over 500,000 small and medium-sized businesses. The affected ads are sponsored products, sponsored brands, and display ads that appear when searching on Amazon or browsing product pages.

Amazon has denied the allegations, saying its auction system worked as advertised and that advertisers were not overcharged. The company claims that its average cost for Sponsored Product ads stayed flat from 2019 to 2024, adjusted for inflation.