“The company’s deception continues to this day,” the lawsuit states.
Amazon has been sued by the Federal Trade Commission (FTC) and 22 states over its handling of advertising auctions. The company made billions of dollars by “secretly” inflating its prices for more than six years, according to an FTC statement.
The regulator alleges that Amazon deceived its advertisers for years by adding “hidden” surcharges to its ad auctions, causing ad buyers to unknowingly pay too much for sponsored product placements and other advertising on Amazon’s platform. The lawsuit alleges that this practice was well known within the retail giant, even after “several” employees raised the issue.
“Amazon has successfully imposed hidden surcharges on advertisers almost every time a shopper clicks on an advertisement on Amazon’s website,” the lawsuit says. This tactic, which “continues to this day,” according to the FTC, has proven lucrative for the company. “The scheme likely illegally extracted more than $20 billion from its advertising clients without their knowledge,” the lawsuit claims.
Some details of the lawsuit have been redacted, but it cites several internal documents in which Amazon employees appear to question the company’s handling of auction prices. For example, he cites a memo that “acknowledges that Amazon’s use of undisclosed reserve prices ‘increases our revenue in the short term,'” but predicts that it would ‘harm us in the long term.’
The FTC says overcharging advertisers ultimately led to price gouging on the platform, which harmed U.S. consumers. Amazon disputed that notion, writing in a lengthy statement that the lawsuit “cites no evidence of consumer price increases.” The company called the FTC’s action “misguided” and said it “fundamentally misunderstands” how ad auctions work. “After reviewing approximately 1.5 million pages over six years, the FTC relies on a handful of simplified communications to allege attempted company-wide deception,” the company writes. “This is obviously false.”
