Amazon Sued Over Alleged $20B Advertising Scam

The U.S. Federal Trade Commission (FTC) and 22 state attorneys general have filed a lawsuit against Amazon.com Inc., alleging that the e-commerce giant systematically overcharged advertisers by more than $20 billion since 2019.

The complaint, filed in Seattle federal court, claims that Amazon misled 1.2 million advertising customers, including over 500,000 small and medium businesses, about the pricing and terms of its sponsored listings. The FTC alleges that Amazon manipulated the auction process to increase profits, inflating prices for three of its advertising products: Sponsored Products, Sponsored Brands, and Sponsored Display.

Amazon uses a 'second price' auction process, where participants are ranked by bid and relevance to shoppers' searches, and the winning bidder pays the minimum amount necessary to beat the second place bidder. However, according to the suit, Amazon allegedly began secretly manipulating this process in 2018, replacing the actual price with a higher one designed to maximize profits.

The lawsuit targets a key area of growth for Amazon, with advertising revenue reaching $68.6 billion last year. The FTC claims that consumers are likely paying more for products due to Amazon's alleged inflation of ad prices.