The company’s “deception continues to this day,” the lawsuit says.
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Amazon has been sued by the Federal Trade Commission (FTC) and 22 states over its handling of advertising auctions. The company has made billions of dollars by “secretly” inflating its rates for more than six years, according to a statement from the FTC.
The regulator alleges that Amazon for years deceived its advertisers by adding “hidden” surcharges to its ad auctions, which resulted in ad buyers unknowingly overpaying for sponsored product placements and other ads on Amazon’s platform. The lawsuit alleges that the practice was well-known within the retail giant, even after “multiple” employees raised the issue.
“Amazon has been able to successfully impose hidden surcharges on advertisers almost every time a shopper clicks on an advertisement on the Amazon website,” the lawsuit states. The tactic, which “continues to this day,” according to the FTC, has been lucrative for the company. The “scheme has likely illegally extracted over 20 billion dollars from its unwitting advertising customers,” the lawsuit alleges.
Some details from the lawsuit have been redacted, but it quotes from several internal documents in which Amazon employees would seem to question the company’s handling of auction pricing. For instance, it quotes one memo that “acknowledged that Amazon’s use of undisclosed reserve prices ‘increases our short-term revenue,’ but predicted that it would ‘hurt us in the long run.'”
The FTC says that overcharging advertisers ultimately led to higher prices on the platform, which hurt American consumers. Amazon has disputed that notion, writing in a lengthy statement that the lawsuit “cites no evidence of consumer price increases.” The company called the FTC’s action “misguided” and said it “fundamentally misunderstands” how advertising auctions work. “After reviewing approximately 1.5 million pages spanning six years, the FTC leans on a handful of simplified communications to allege a companywide effort to deceive,” the company writes. “That is patently false.”
