Amazon Sued by FTC and 21 States Over Alleged Advertising Price Inflation Scheme

California and 21 other states have joined the Federal Trade Commission (FTC) in filing a lawsuit against Amazon, alleging that the e-commerce giant has engaged in deceptive practices to inflate prices in its online search advertising auctions.

The complaint alleges that Amazon applied undisclosed surcharges to over 1 million brands and sellers on its platform for more than seven years, potentially costing customers tens of billions of dollars.

According to the FTC, Amazon's 'second price' auction system actually charges advertisers their own winning bid close to 80% of the time, effectively converting it into a first price auction. This has generated significant revenue for the company by increasing prices on ordinary shopping days and applying greater increases on high-volume days like Prime Day and Black Friday.

Amazon responded to the lawsuit, stating that its approach to pricing 'contradicts any suggestion of consumer harm' and that it provides customers with the lowest prices every day across a wide selection of products.