The federal government is once again setting its sights on a major American corporation, with the Federal Trade Commission (FTC) and a bipartisan group of 22 states filing a lawsuit alleging Amazon manipulated its online advertising auctions.
The complaint claims that since 2019, Amazon has pocketed an estimated $20 billion by overriding actual auction results with higher prices to boost its own bottom line.
According to the filing, the company allegedly abandoned the standard 'second-price' auction model—where winners pay just one cent more than the next highest bidder—in favor of charging advertisers their full winning bid nearly 80% of the time.
Regulators argue that these inflated costs are ultimately passed down to the American consumer, leading to higher prices across the platform. Amazon has pushed back against the allegations, calling the FTC’s lawsuit 'misguided' and asserting that the agency fundamentally misunderstands the mechanics of the digital advertising market.
The company noted that average winning bids for its Sponsored Products search ads have actually dropped 50% since 2019. This legal battle follows a previous run-in with the FTC where Amazon settled for $2.5 billion over allegations regarding its Prime subscription enrollment practices.
As the case proceeds, Amazon’s stock performance remains under pressure, closing down 2.5% following the announcement of the suit.
Tags
