The Federal Trade Commission (FTC) along with 22 states, have sued Amazon for “manipulating” ad auctions.
Amazon is being sued by 22 US states, as well as the Federal Trade Commission (FTC), for “manipulating” online digital ad auctions.
The lawsuit alleges that Amazon bumped up prices in digital ad auctions for advertisers looking to become a “sponsored product”. Advertisers would bid to be “sponsored”, and Amazon told them that the highest bid would only end up paying slightly more than the second-highest bid.
But, the new lawsuit alleges that Amazon, while running the auction, would secretly raise the second-place price in order to charge more for the winning bid.
Although this would only end up charging the brands a few pence more, it has added up to roughly $20bn in illegal charges, the lawsuit says.
California Attorney General, Rob Bonta, said in a statement: “Amazon has misrepresented how it calculates the cost of advertising on its platform. Over the years, Amazon has rigged billions of ad auctions, inflating Amazon’s profits at the expense of Americans who rely on Amazon’s advertising to generate business.”
The FTC reviewed over a million internal Amazon documents, which were obtained through subpoenas. Amazon said that the lawsuit did not present evidence of harms to shoppers, and that the ad auctions prioritise relevant products to shopper terms before bid amounts are considered – which helps audiences find the products they want and keep prices down for advertisers.
New York Attorney General, Letitia James, issued a statement criticising Amazon’s alleged conduct regarding ad auctions.
“Consumers across the country are likely paying more for everything from groceries to electronics because Amazon has wrongfully inflated its ad prices,” James said. “Deceptive practices like this hurt consumers and small businesses, and we are taking Amazon to court to get justice for those who were harmed.”
The process
Since 2012, the ad giant has used a “second price” auction process, the suit alleges.
With this, advertisers are ranked by a “combination of their bid and relevance to shoppers’ searches,” and the winning bidder “only pays the minimum amount necessary to beat the second place bidder,” typically one cent, the FTC and states say.
Since 2018, the lawsuit alleges that Amazon has been “secretly manipulating” the auction procedure in a bid to increase profits by replacing the auction price with a higher one.
Amazon insists that the FTC “fundamentally misunderstands how advertisers operate” arguing that “advertisers adjust bids based on real-world performance, not descriptions of auction mechanics,” it said in its statement.
The company estimates that the relevance-based approach has saved advertisers over $8bn between 2021 and 2025 in comparison with selecting ads primarily on bid value. It also says roughly 92% of Sponsored Products ads selected in 2024 were not the highest monetary bid.
FTC chairman, Andrew Ferguson, confirms that the conduct has potentially enormous consequences thanks to Amazon’s size.
