FTC Accuses Amazon of Price Manipulation in Ad Auctions
Photo: The Verge
Quick answer
The FTC accuses Amazon of systematically inflating ad prices through manipulated auctions since 2019, resulting in over $20 billion in unlawful gains.
The U.S. Federal Trade Commission (FTC) and 22 state attorneys general have filed a lawsuit against Amazon, accusing the company of systematically inflating ad costs on its platform. According to the plaintiffs, since 2019, Amazon has used 'hidden markups' that artificially increase advertisers' expenses, potentially driving up costs for end consumers.
The core of the accusation revolves around Amazon's manipulation of ad auction mechanisms. Under standard auction rules, the winner pays one cent more than the second-highest bidder. However, the FTC claims Amazon replaces the actual second price with a pre-calculated 'proxy price' determined by the company itself. This practice allegedly allows Amazon to maximize profits while undermining fair competition.
According to the lawsuit, this scheme resulted in Amazon unlawfully extracting over $20 billion in excess costs from advertisers. The complaint also states that Amazon violated the FTC Act and over a dozen state laws. As of publication, Amazon denies the allegations, calling the FTC lawsuit 'erroneous.'
In its official statement, Amazon argues that the average winning bid costs for sponsored products (Sponsored Products) decreased by 50% between 2019 and 2024. The company also denies that inflated ad prices lead to higher consumer product costs, emphasizing that advertisers benefit from reduced expenses.
Common questions
- What specific practices does the FTC accuse Amazon of in ad auction manipulation?
- The FTC alleges Amazon replaced the actual second-highest bid in auctions with a pre-calculated 'proxy price' to maximize profits, deviating from fair competition principles.
- How much did Amazon allegedly overcharge advertisers through these manipulations?
- According to the FTC, Amazon unlawfully extracted over $20 billion from advertisers by inflating ad prices since 2019.
- How has Amazon responded to the FTC's allegations?
- Amazon dismissed the FTC lawsuit as erroneous and highlighted that the average winning bid costs for sponsored products have decreased by 50% over the past five years.
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