GoKawiilThe Federal Trade Commission on Monday sued Amazon , alleging the e-commerce giant "secretly and systematically overcharged" advertisers on its platform by manipulating its pricing and auction systems.
The lawsuit, which was joined by 22 state attorneys general, argues that Amazon may have reaped more than $20 billion from advertisers by using "hidden surcharges" dating back to a change to its auction rules that took effect in 2019.
"Amazon has millions of advertising customers who were misled into paying significantly higher prices," FTC Chairman Andrew Ferguson said in a statement. "These higher costs were largely passed on to American consumers."
In a blog post, Amazon called the FTC's lawsuit "misguided" and said the complaint "fundamentally misunderstands how advertisers operate." The company added that the agency's lawsuit doesn't include evidence of consumer price increases.
"We've provided advertisers with guidance about our auctions and pricing in the main tools they use to manage their campaigns, and we continue to update that guidance," the company said. "We look forward to making our case in court."
The company said its auction systems have saved advertisers $8 billion between 2021 and 2025, not cost them extra.
The complaint, which was filed in U.S. District Court for the Western District of Washington, centers on Amazon's sponsored products ads, brands ads and display ads that run alongside search results on its sprawling webstore.
Amazon has amassed the third-largest digital advertising business globally, trailing only Google and Meta . The company hauled in more than $68 billion in ads revenue last year, with the lion's share coming from sales of sponsored products ads.
The company has traditionally used a "second-price" auction system, wherein it told advertisers they "only pay the least bid amount needed in order to win," the complaint states, citing Amazon's own marketing materials.
The FTC alleges in its complaint that Amazon in 2019 changed its auction rules without notice by adding an undisclosed surcharge it referred to as a "soft reserve price," which led to higher ad prices.
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