Amazon Sued Over Alleged Ad Price Manipulation Scheme
Amazon's stock is sliding on Tuesday after the Federal Trade Commission (FTC) announced a lawsuit against the company. The FTC claims Amazon ran a hidden pricing scheme in its advertising marketplace for over seven years, leading to inflated rates for well over a million businesses.
The FTC alleges that Amazon marketed its ad placements as using a conventional bidding system, but secretly added an extra charge starting in 2019, known as a 'soft reserve price'. This led to advertisers paying their exact bid rather than a discounted rate, with the percentage going from around 30-40% in 2021 to nearly 80% by 2024.
Amazon has pushed back against the FTC's claims, arguing that its advertising business is being mischaracterized and that neither shoppers nor advertisers were harmed. The company points to its own pricing data showing that per-click costs on Sponsored Products search ads remained roughly flat once adjusted for inflation between 2019 and 2024.
The lawsuit has sparked concerns about the impact on small businesses, with some estimates suggesting tens of billions of dollars were funneled back to Amazon as a result of the hidden pricing scheme.