FTC and 22 States Sue Amazon Over Alleged Secret Ad Surcharge Scheme

The Federal Trade Commission and attorneys general from 22 states filed a lawsuit Monday accusing Amazon of running a hidden ad-pricing scheme. The complaint alleges that for more than seven years, Amazon quietly increased the amount advertisers paid through its online auction system, potentially generating tens of billions of dollars in extra revenue.

According to the complaint, the practice affected more than 1 million brands and sellers using Amazon’s advertising products, including Sponsored Products, Sponsored Brands, and Display ads that appear alongside search results.

The FTC said Amazon told more than 500,000 small and medium-sized businesses that it used a “second-price” auction, meaning the winning advertiser would pay just one cent more than the next-highest bid rather than its own full bid amount. The lawsuit alleges that starting in 2019, Amazon made a surreptitious change to that system without telling advertisers.

The states joining the FTC are Alaska, Arizona, California, Colorado, Florida, Idaho, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maryland, Nebraska, New Jersey, New York, North Carolina, Oklahoma, Pennsylvania, Rhode Island, South Carolina, Vermont, and Washington.