Amazon Sued Over Alleged Scheme to Inflate Ad Costs
The Federal Trade Commission (FTC) and 22 state attorneys general have filed a lawsuit against Amazon, alleging that the company used artificial bids to inflate costs for advertisers.
The complaint claims that Amazon's system allowed the company to charge prices 'beyond what [can] be achieved through advertiser competition,' as stated by a former employee. The FTC alleges that this scheme has been in place for more than seven years, affecting over a million brands and sellers.
FTC Chairman Andrew Ferguson said, '[Amazon] has millions of advertising customers who were misled into paying significantly higher prices.' These increased costs are 'largely passed on to American consumers,' according to the FTC.
Amazon responded with a blog post, stating that the FTC's claim 'fundamentally misunderstands how advertisers operate.' The company claims its 'soft reserve prices' allow 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.