FTC and 22 states sue Amazon for allegedly inflating ad prices for 1.2 million advertisers

For businesses selling on Amazon , winning an advertising auction may have come with a hidden price.

The Federal Trade Commission and 22 states sued Amazon on Aug.

31, accusing the retail giant of quietly manipulating its ad auctions, secretly inflating ad prices, and collecting more than $20 billion in improper charges.

The case involves about 1.2 million advertisers , including hundreds of thousands of small and midsize businesses.

Regulators say many paid more than expected without realizing it.

Filed in the U.S.

District Court in the Western District of Washington, the FTC complaint states : Since 2019, Amazon.com, Inc. ('Amazon') has secretly and systematically overcharged its approximately 1.2 million advertising customers by manipulating the 'auctions' that it uses to set the price of ads on its platform.

Amazon represents, and advertisers believe, that competitive auctions set the prices for advertising on its leading e-commerce website.

But, in reality, Amazon overrides and replaces the actual auction results with higher prices set by Amazon to increase its profits.

For years, Amazon has secretly inflated the auction prices for three of its advertising products: Sponsored Products, Sponsored Brands and Sponsored Display.

Amazon allegedly told advertisers it generally used a "second-price" auction.

Under that system, the winner pays slightly more than the second-highest bid — not the full amount it offered.

But regulators say that isn’t always what happened.

According to the lawsuit, Amazon began changing the process in 2018.