The Federal Trade Commission, along with 22 states, is suing Amazon, alleging that the online behemoth defrauded advertisers.
The lawsuit was filed in the U.S. District Court in the Western District of Washington, The Associated Press reported.
It claims the company overcharged 1.2 million customers by misleading them about prices for online ad auctions, the AP said.
The suit says Amazon offered competitive prices on ad products when it was instead raising auction prices.
The Wall Street Journal said the company earned tens of billions of dollars from the model.
“These inflated advertising charges allow Amazon to extract additional revenue from sellers on its platform, on top of the account fees, referral fees, and fulfillment and storage fees that increasingly both cut into Amazon sellers’ profit margins and lead to price increases borne by Amazon shoppers,” the complaint states, according to the newspaper.
Amazon responded in a blog post that the FTC “leans on a handful of simplified communications to allege a companywide effort to deceive,” calling it “patently false,” the AP reported.
“The FTC’s claim fundamentally misunderstands how advertisers operate. Advertisers adjust bids based on real-world performance, not descriptions of auction mechanics. Even accepting the FTC’s flawed premise that advertisers do not adjust bids, we estimate they saved over $8 billion from 2021 to 2025 as a result of Amazon prioritizing ad relevancy over selecting ads on bid price alone,” the company said.
The states that joined the lawsuit, including Florida, North Carolina, Pennsylvania and Washington, may be able to get some of the money back, The Wall Street Journal reported.
The suit seeks a permanent stop to the practices along with monetary penalties, the Times reported.
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