Amazon Stock Plunges 3% on FTC Lawsuit Over Ad Price Manipulation

Amazon's stock price has fallen by around 3% after being hit with a lawsuit from the Federal Trade Commission (FTC) over its handling of sponsored-product advertising auctions.

The FTC, along with more than 20 state attorneys general, claims that Amazon manipulated ad prices on its marketplace by participating in auctions with its own 'soft reserve' bid since 2018. This practice allegedly caused minimum ad prices to exceed the next highest bid and wasn't clearly disclosed to merchants.

The complaint alleges that Amazon interfered with auctions 70-80% of the time, leading to tens of billions of dollars in revenue for advertisers over a seven-year period, including a 50% hike in pay-per-click advertising on key shopping days.

Despite this setback, analysts remain optimistic about Amazon's financial prospects and future growth. The company generated $200.6 billion in revenue last quarter, up 19.6% year-over-year, with AWS reporting a 36.7% rise in revenue to $42.2 billion.