FTC, Washington accuse Amazon of overcharging advertisers by more than $20 billion

The Federal Trade Commission and 22 states on Monday accused retail giant Amazon of deceiving businesses by overcharging prices to advertise on its massive retail platform, pocketing billions for the company.The lawsuit claimed 1.2 million advertisers paid more than they realized because Amazon raised the minimum price to place ads without them knowing.Its the third major lawsuit that the federal agency has filed against Amazon, which became the third-biggest ad platform in the United States in 2018.The Wall Street Journal first reported the lawsuit.RELATED STORY | Are you getting your money's worth from Amazon Prime?Amazon sets its advertising prices using an auction system, in which companies bid on different types of ads and where they appear. In practice, the winning advertiser is only supposed to pay a cent more than the second-place bid. But the lawsuit claims that in 2018, Amazon began secretly manipulating its auction results to increase its ad prices.In actions such as an alleged hidden surcharge and placing artificial bids, Amazon likely illegally extracted over 20 billion dollars from 1.2 million customers, almost half of whom were small or medium-sized businesses.

The FTC claimed these higher costs were eventually passed down to Amazon shoppers.In a 3,000-word statement to CNN, Amazon said it strongly disagrees with the misguided lawsuit.The FTCs claim fundamentally misunderstands how advertisers operate, Amazon said. Advertisers adjust bids based on real-world performance, not descriptions of auction mechanics. Even accepting the FTCs 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.Amazon claims it shared its data with the FTC on multiple occasions, but they have shown little interest in engaging with the facts and appear more focused on trying to secure some sort of monetary victory.CNN has reached out to the FTC for comment.Auction-based ad buying is an established practice in the digital advertising world and relies entirely on platforms strictly adhering to well-established rules, University of Notre Dame marketing professor and strategist Vamsi Kanuri wrote in a note to CNN.But even if Amazon hadnt been transparent with advertisers, its still a platform that generates $927.82 billion in worldwid…

More than 500,000 small and medium-sized businesses were among the advertising customers affected, according to the lawsuit.