FTC and 22 States Sue Amazon Over Search Advertising Auction Prices
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The Facts
- The Federal Trade Commission and 22 state attorneys general sued Amazon on Monday in federal court in Washington state.
- The complaint alleges Amazon secretly raised the minimum price advertisers had to pay to place ads promoting their products.
- The lawsuit says the alleged conduct brought Amazon more than $20 billion from advertising customers over about seven years.
- Regulators say roughly 1.2 million brands and marketplace sellers were overcharged for advertising.
- The advertising at issue includes Amazon's "Sponsored Products," "Sponsored Brands" and "Sponsored Display" placements shown in search results.
- FTC Chairman Andrew Ferguson said the higher advertising costs were largely passed on to American consumers.
- Amazon rejected the suit as "misguided" and said an advertiser never pays more than the amount of its bid.
- The participating states could seek civil penalties and attempt to recover some of the alleged advertiser losses.
Context
How does Amazon's ad auction work, and what exactly is alleged?
Amazon uses second-price auctions, in which the winning advertiser pays one cent more than the next-highest bid Ouest France. The complaint alleges Amazon "overrides and replaces the actual auction results with higher prices set by Amazon to increase its profits," partly by placing its own bids in the auctions BBC,NY Post.
When is the alleged conduct said to have started?
Accounts differ on the starting date while agreeing on a roughly seven-year span. Some reports and the complaint's language point to 2019 BBC,NY Post, while others say Amazon began manipulating the auctions in 2018 Washington Post,tagesschau.de.
How has Amazon responded beyond calling the case misguided?
Amazon said the FTC's claim "fundamentally misunderstands how advertisers operate" and called the complaint "patently false" Yahoo! Finance. The company also said average advertising costs remained stable and that its policies aim at relevance for customers Terra.
Which states joined the case?
A bipartisan group of 22 attorneys general joined the FTC, including California, New York, Florida, Louisiana, Iowa, Alaska, Arizona, Colorado, Idaho and Illinois NY Post,CBS News. California Attorney General Rob Bonta said Amazon "has misrepresented how it calculates the cost of advertising on its platform" Independent.
Where Left and Right agree, and where they split
Left and right largely agree on this one.
- Where Left and Right agree
- Both read the alleged secret ad-price floor as indefensible and demand the same remedy: civil penalties plus recovery of what 1.2 million advertisers were overcharged.
- Where Left and Right differ in emphasis
- Both sides land on restitution, not just fines; one because sellers are captive to an auction they cannot audit, the other because a hidden floor is not a price at all.
- Why they won’t converge
- The divide is a values gap over burden and remedy: one reading treats sellers' captivity inside a marketplace they cannot leave as reason enough to demand Amazon explain itself, the other treats this as ordinary deception that must be proved before anything is owed.
How left and right read it
When one company owns the marketplace and the ad auction inside it, roughly 1.2 million brands and sellers have no exit — and that captivity is what makes an alleged secret floor on ad prices worth more than $20 billion over seven years. Small sellers cannot audit an auction they depend on, so the burden of proof belongs to Amazon, not to them. The regulators' own description of the mechanism says the rest. Restitution, not just penalties.
“But in practice, Amazon allegedly replaced the price determined by the runner-up bidder with a higher price, known as a "soft reserve," which prosecutors say was "designed to maximize Amazon's profits and decrease the cost efficiency of its advertisers' campaigns."” — The Independent
A market runs on prices that mean what they say, so a secretly raised floor inside an ad auction is not a price at all but a charge dressed as a bid. Regulators allege that hidden floor pulled more than $20 billion from roughly 1.2 million brands and sellers across the sponsored placements in search results, and the FTC chairman says consumers largely paid it. Size earns no presumption. If proved: penalties and recovery of what was overcharged.
“The digital ad deception would have started under founder and executive chairman, Jeff Bezos. For years, Amazon has secretly inflated the auction prices for three of its advertising products: Sponsored Products, Sponsored Brands and Sponsored Display.” — New York Post
The receipts — all 100 sources
Wire services (4)
Independent coverage (50)
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