Amazon Faces FTC Suit Claiming It Misled Advertisers on Pricing

The Federal Trade Commission (FTC) is set to initiate legal action against e-commerce behemoth Amazon.com Inc., alleging the company deceived advertisers on pricing, according to a source familiar with the matter. The FTC, which enforces antitrust and consumer protection laws, along with several state attorneys general, have been investigating Amazon's advertising practices.

Reports suggest the potential lawsuit could result in multi-billion dollar civil penalties. The probe, initiated last year, is concentrated on whether Amazon accurately disclosed the terms and pricing associated with its sponsored ads, which often appear as the top products in search results. Amazon maintains that the FTC has misrepresented the workings of its advertising auctions and has provided no evidence of harm to consumers.

In a statement, the company clarified that its ad system prioritizes product relevance to shopper search terms before considering bid amounts, which contributes to lower prices for advertisers. The average cost-per-click for Amazon search ads remained constant when adjusted for inflation from 2019 to 2024, while advertising performance improved.

This legal dispute marks Amazon's latest clash with the FTC, which has been scrutinizing various aspects of the company's operations since at least 2019. In 2019, Amazon settled a separate probe over its Prime subscription practices by paying $2.5 billion. A trial over claims of Amazon monopolizing online retail markets and negatively impacting shopper quality and seller pricing is scheduled for early next year.