The Federal Trade Commission (FTC) filed a lawsuit against Amazon.com on Monday, accusing the e-commerce company of misleading advertisers by secretly increasing the minimum prices for its advertising products. The complaint alleges that this practice, which began in 2018, resulted in advertisers overpaying by more than $20 billion and ultimately caused higher prices for consumers.
According to the FTC, the issue centers on Amazon’s auction system for sponsored ads, including Sponsored Products, Sponsored Brands, and Sponsored Display ads. These ads appear to consumers when searching for products on Amazon’s website and mobile app. Amazon’s auction method is designed to charge the winning bidder only slightly more than the second-highest bid, a pricing structure commonly used by technology companies to provide transparency and encourage competitive bidding.
However, the FTC claims that starting in 2018, Amazon introduced an internal system it called “soft reserve” pricing. Under this system, the winning bidder was charged prices adjusted upward after the auction concluded, rather than paying just above the second-highest bid. Internal communications reportedly indicated that some Amazon employees recognized these “post-hoc pricing adjustments” were unexpected by advertisers. The complaint states that Amazon has intervened in auctions this way in approximately 70 to 80 percent of cases in recent years, with higher surcharges during peak shopping periods such as the Christmas season.
FTC Chairman Andrew Ferguson argued on the social media platform X that the artificially increased ad prices led to higher retail prices on essential goods, such as food and groceries, which affect everyday consumers. Shaoul Sussman, a former associate director for litigation at the FTC’s Bureau of Competition, criticized the practice as a tactic intended to “raise rivals’ costs and add to Amazon’s bottom line.”
Amazon responded by calling the lawsuit “misguided,” asserting that the FTC’s allegations fundamentally misunderstand advertiser behavior. The company said the adjustments were intended to preserve the value of premium advertising inventory after efforts to make ads more relevant led to falling prices. Amazon also stated that the majority of ad placements—about 92 percent—were not awarded to the highest bidders and that its advertising practices did not harm advertisers or consumers.
Amazon, which operates the world’s third-largest digital advertising platform after Google and Meta Platforms, said it intends to contest the lawsuit in court. The trial is expected to delve into the details of the auction practices and their impact on advertisers and consumers.