Amazon Sued by FTC and 22 States Over Alleged Advertising Scheme
The Federal Trade Commission (FTC) and attorneys general from 22 states have filed a lawsuit against Amazon, alleging that the company used artificial bids to inflate costs for advertisers. The complaint claims that Amazon used an 'invented auction participant' to drive up prices for advertising placements on its online store. This scheme allegedly resulted in tens of billions of dollars in revenue for the company.
The FTC's lawsuit was filed alongside attorneys general from Alaska, Arizona, California, Colorado, Florida, Idaho, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maryland, Nebraska, New Jersey, New York, North Carolina, Oklahoma, Pennsylvania, Rhode Island, South Carolina, Vermont, and Washington. The coalition is seeking civil penalties, restitution, costs and fees, and injunctive relief.
Amazon has responded to the lawsuit, stating that 'the FTC's claim fundamentally misunderstands how advertisers operate.' The company claims its 'soft reserve prices' allowed it to award advertisements to the most relevant bids, rather than the highest bid amount, while still charging the true market value of an ad placement. Amazon generated over $68 billion in ad revenue last year and is the third-largest digital advertising business worldwide.
The lawsuit alleges that Amazon carried out this scheme for more than seven years, increasing prices for over a million brands and sellers. The complaint quotes a former company employee who said the system allowed the company to charge prices 'beyond what [can] be achieved through advertiser competition.'