FTC, 22 states sue Amazon over advertising surcharges

The states and the Federal Trade Commission claim Amazon knowingly deceived small businesses by falsely inflating ad prices.SAN FRANCISCO (CN) — Twenty-two states and the Federal Trade Commission sued Amazon Monday, claiming the tech e-commerce giant deceptively and unfairly inflated prices in its online search advertising auctions.In a 181-page complaint filed in the federal court in Washington state, the coalition says that for seven years, Amazon increased prices to advertise on its platform for over a million brands and sellers. They say Amazon has likely profited $20 billion from unsuspecting advertisers.The plaintiffs’ claims range from federal concealment, deceptive, and unfair practice violations and by-state violations of consumer protection laws, fraud and false advertising laws.Amazon uses what is called “second price auctions” to set prices for businesses buying ad space on Amazon’s website and app.When done lawfully, the coalition claims, the businesses compete and are ranked by their ad bid and relevance to shoppers’ searches. The winning bidder pays one cent more than the second-place bid.But in Amazon’s version, the plaintiffs claim, the tech behemoth adds a surcharge on top of the second-place bid, driving up the final price paid by the winning business.At a press conference Monday, California Attorney General Rob Bonta said Amazon went to “great lengths to conceal the unlawful scheme,” saying it generates more than $68 billion a year as the world’s largest digital advertising company.“Amazon’s price inflation is illegal, plain and simple,” Bonta said.Bonta said Amazon manipulated an already “opaque process,” and that if found out Amazon would “irrevocably damage advertiser trust.”“It’s gone as far as blatantly lying to businesses when the businesses complain about surprisingly high costs of running ads,” he said.Bonta noted that in 2021 during the holiday season, several dozen businesses complained about the high advertising prices and Amazon told the businesses the high costs were due to shopper demand. After that, according to Bonta, Amazon “wised up” and raised prices ahead of peak shopping days.Bonta and California are joined in the suit by Alaska, Arizona, Colorado, Florida, Idaho, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maryland, Nebraska, New Jersey, New York, North Carolina, Oklahoma, Pennsylvania, Rhode Island, South Carolina, Vermont and Washington.The coalition seeks a permanent injunction to prevent further Federal Trade Commission Act violations, and money for the plaintiff states from civil penalties, restitution and disgorgement.Amazon did not immediately respond to a request for comment.Subscribe to our free newslettersOur weekly newsletter Closing Arguments offers the latest about ongoing trials, major litigation and rulings in courthouses around the U.S. and the world, while the monthly Under the Lights dishes the legal dirt from Hollywood, sports, Big Tech and the arts.Additional Reads