FTC Sues Amazon Over Alleged Advertising Manipulation

The Federal Trade Commission (FTC) has filed a lawsuit against Amazon.com Inc. (AMZN), alleging that the e-commerce giant secretly overcharged advertisers by manipulating its pricing and auction systems.

According to the FTC, since changes to auction rules took effect in 2019, Amazon may have profited more than $20 billion from advertisers through 'hidden surcharges'. The lawsuit was initiated by the attorneys general of 22 states.

Following the announcement, Amazon's stock fell over 3%. The company's current Price-to-Sales (P/S) ratio is significantly above its historical median of approximately 3.4x, indicating that earnings-based valuation metrics like P/E are not applicable due to its cash-flow-negative status.