FTC Sues Amazon Over Deceptive Advertising Practices

The Federal Trade Commission (FTC) is planning to sue Amazon over allegations of deceptive advertising practices. According to a report in the Wall Street Journal, officials claim that Amazon quietly raised the minimum price sellers paid for ads on its store, earning tens of billions of dollars over seven years.

More than 20 state attorneys general are joining the FTC in this lawsuit. The news did not come as a surprise to investors, who saw Amazon's stock fall by over 3% on Monday afternoon, erasing roughly $86 billion in market value.

The FTC alleges that Amazon began placing its own bid in auctions, sitting just above the runner-up and causing winners to pay more. This tactic was not disclosed to sellers, who were left to blame heavy competition for the high prices. The practice is now used in 70-80% of auctions, with click prices climbing by up to 50% on peak days.

Amazon's seller guidance does mention reserve pricing, stating that 'some reserves help allocate ad space by setting a bid threshold.' However, the FTC claims that this was not disclosed to sellers.