FTC Sues Amazon Over Alleged $20 Billion Ad Price Manipulation Scandal

The Federal Trade Commission (FTC) and 22 states have filed a lawsuit against Amazon, accusing the company of overcharging businesses for advertising on its e-commerce platform. The lawsuit claims that Amazon secretly manipulated its auction system to increase ad prices, resulting in over $20 billion in illegal charges to 1.2 million advertisers.

According to the FTC, Amazon's auction system is supposed to allow companies to bid on different types of ads and where they appear. However, the lawsuit alleges that Amazon began secretly manipulating its auction results in 2018 to increase ad prices. This resulted in higher costs being passed down to Amazon shoppers.

Amazon strongly disagrees with the lawsuit, stating that it 'fundamentally misunderstands' how advertisers operate. The company claims that advertisers adjust bids based on real-world performance, not descriptions of auction mechanics. However, the FTC argues that this is a flawed premise and that advertisers may have lost billions as a result of Amazon's actions.

The lawsuit marks the third major action taken by the FTC against Amazon in recent years. In 2023, Amazon agreed to pay $2.5 billion to settle allegations that it tricked consumers into signing up for its Prime subscription service and made it hard to cancel. The company has also faced criticism over user privacy violations.