An Amazon warehouse near Newport, Delaware. The Federal Trade Commission and 22 states have sued Amazon over an alleged scheme to inflate advertising prices. (Photo by Jacob Owens/Spotlight Delaware)
The Federal Trade Commission (FTC) and 22 state attorneys general have initiated legal action against Amazon, alleging the company used artificial bids to inflate advertising costs, resulting in tens of billions in revenue. The lawsuit claims that Amazon employed a fictitious auction participant to increase prices for ad placements and sponsored product spots, misleading millions of advertising clients.
FTC Chairman Andrew Ferguson stated that these elevated costs were primarily transferred to American consumers. The complaint highlights a seven-year scheme affecting over a million brands and sellers. The coalition, which includes states like California, Florida, and New York, seeks civil penalties, restitution, costs, and injunctive relief.
Rhode Island Attorney General Peter Neronha criticized Amazon, stating the corporation prioritized profits over legality, impacting small- and medium-sized businesses. In response, Amazon argued that the FTC’s claims misunderstand advertiser operations, asserting that the average cost-per-click for sponsored ads remained stable when adjusted for inflation from 2019 to 2024.
Amazon’s blog post accused the FTC of misinterpreting simplified communications to allege deception, which the company denies. They claim that their “soft reserve prices” strategy ensured ad placements went to the most relevant bids, charging true market value. The lawsuit was filed in the U.S. District Court for the Western District of Washington, where Amazon is headquartered.
Amazon stands as the third-largest digital advertising entity globally, following Google and Meta, with over $68 billion in ad revenue last year. Previously, Amazon settled with the FTC for $2.5 billion over allegations of deceptive Prime subscription enrollments.
Stateline reporter Alex Brown can be reached at abrown@stateline.org.
This story was originally produced by Stateline, which is part of States Newsroom, a nonprofit news network which includes Daily Montanan, and is supported by grants and a coalition of donors as a 501c(3) public charity.
“`
