FTC accuses Amazon of running a ‘secret ad surcharge scheme’ in new lawsuit | TechCrunch

The Federal Trade Commission, alongside attorneys general from twenty-two states, has initiated a major lawsuit against Amazon, accusing the e-commerce giant of orchestrating a covert pricing scheme to inflate advertising costs on its platform.

According to the legal complaint, the company manipulated its digital ad auction system for more than seven years, a practice that allegedly impacted over one million merchants and brands. Regulators assert that these deceptive tactics allowed Amazon to illicitly secure tens of billions of dollars in additional revenue by misleading participants about the underlying mechanics of its bidding platform. The legal action specifically targets promotional formats, such as Sponsored Products and Display ads, that are prominently featured alongside search results.

The core of the dispute centers on the specific auction model Amazon advertised to hundreds of thousands of small and medium-sized businesses. While the corporation publicly promised a standard second-price auction where winners would pay only a nominal amount above the runner-up's bid, regulators claim Amazon secretly introduced artificial price floors and simulated bids to drive up costs. This practice allegedly forced advertisers to pay their absolute maximum bid prices nearly eighty percent of the time, effectively transforming a supposedly fair auction into a much more expensive format. Amazon has strongly rejected the accusations, describing the government's legal challenge as misguided and claiming that regulators misunderstand the natural pricing variations inherent in complex digital advertising environments.