FTC, 22 States Sue Amazon Over Unfair Charges In Ad Surcharge Scheme

(RTTNews) - The U.S. Federal Trade Commission or FTC along with 22 states have filed a suit against tech major Amazon for allegedly concealing unfair charges in its digital advertising auction pricing. Amazon's scheme has likely extracted tens of billions of dollars as undisclosed surcharges from its advertising customers, the commission said in a statement.

The FTC and 22 state attorneys general, in the suit filed in the U.S. District Court for the Western District of Washington, allege that the company engaged in deceptive and unfair practices that secretly inflated prices in its online search advertising auctions. As per the complaint, Amazon for over seven years has substantially increased the prices that more than one million brands and sellers were required to pay to advertise on its platform.

The affected advertising customers include over 500,000 small- and medium-sized businesses that participated in auctions for advertising placements on Amazon.com and its mobile app.

In these auctions, prospective advertisers bid to place Sponsored Product ads, Sponsored Brands ads and Display Ads alongside the results that appear when a consumer searches for a product using a keyword on Amazon's store. Placements are auctioned to the highest-ranked bidder for each keyword.

The complaint alleges that Amazon and its senior executives took active steps to conceal its surcharge pricing system from its advertisers. They allegedly gave false and misleading answers to advertisers who asked the company directly if it had changed its auction format.

Chairman Andrew Ferguson stated, "When one of the world's largest online retailers engages in unfair and deceptive conduct, the impact can be staggering. Amazon has millions of advertising customers who were misled into paying significantly higher prices. These higher costs were largely passed on to American consumers. The FTC under President Trump won't allow this deception to continue."

The attorneys general of Alaska, Arizona, California, 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 are involved in the suit.