FTC, 22 States Sue Amazon Over Alleged $20 Billion Ad Overcharge

Image credit: Search Engine Journal

The Federal Trade Commission and 22 state attorneys general filed a lawsuit against Amazon on Monday, alleging the company secretly overcharged advertisers by more than $20 billion since 2019 through undisclosed changes to its advertising auction system.

The legal action challenges the transparency of digital advertising practices by major tech platforms, claiming Amazon introduced a “soft reserve price” into its auctions while continuing to represent them as a second-price model.

According to the FTC, Amazon’s changes led advertisers to believe they would pay less than their maximum bid, even as a growing number began paying their full bids. The lawsuit specifies that these alleged overcharges have accumulated to more than $20 billion since 2019.

Amazon disputed the allegations, stating that its auction modifications improved ad performance and saved advertisers money. The company claimed that soft reserve prices are a common industry practice.

In a statement, Amazon asserted that its relevance-based auction model resulted in more than $8 billion in savings for advertisers between 2021 and 2025. The company did not specify how these savings were calculated or if they accounted for the alleged overcharges.

The lawsuit highlights increasing scrutiny over the fairness and transparency of digital advertising auctions across the tech industry. Other major platforms, including Google and Meta, have also faced legal challenges and regulatory examination regarding their ad auction transparency and pricing practices.

The Department of Justice has previously investigated advertising practices of large technology companies. Legal challenges against such firms have often reached higher courts, including the Ninth Circuit and the Supreme Court, for resolution.

Source: Search Engine Journal