Amazon sued by FTC for secretly overcharging advertisers since 2019

The US government and 22 states are taking Amazon to court. They claim the online shopping giant has been secretly overcharging advertisers since 2019. According to a new lawsuit, Amazon used hidden fees and rigged its own ad auctions to pull in an extra $20 billion from unsuspecting businesses.

The Federal Trade Commission, or FTC, is leading the legal fight. They say Amazon's actions did not just hurt the businesses buying ads. It also hurt everyday shoppers because those businesses had to raise their prices on Amazon to make up for the extra costs.

How the Alleged Trick Worked

When businesses want their products to show up at the top of Amazon's search results, they bid against each other in auctions. Normally, the winner of these auctions only has to pay one cent more than the runner-up. However, the lawsuit claims Amazon manipulated this system. Instead of using the real runner-up bid, Amazon allegedly created its own higher "fake" price and charged the winner that instead to boost its own profits.

Amazon Slams the Claims

Amazon is fighting back against the lawsuit. The company says the FTC does not understand how advertising auctions work. Amazon also claims that the average price businesses paid for its main search ads actually dropped by 50% between 2019 and 2024. The retail giant argues there is no proof that shoppers paid higher prices because of its ad system.

A Growing Legal Battle

This is not the first time the company has faced pressure from regulators. Just last year, Amazon agreed to pay $2.5 billion to settle a different lawsuit with the FTC over its Prime subscription signup and cancellation practices. This new case could take a long time to go through the courts, but it shows that officials are keeping a very close eye on how the big tech company makes its money.

Quick Questions Answered

A: The FTC and 22 states claim Amazon has been using secret markups to overcharge advertisers since 2019, bringing in over $20 billion in illegal profits.

A: The FTC says that when businesses have to pay more to advertise on Amazon, they pass those extra costs onto customers by raising product prices.

A: Amazon calls the lawsuit misguided and says the FTC is cherry-picking internal messages, while the average cost of its search ads actually went down by 50% over 5 years.