US trade regulator and 22 states accuse Amazon of taking $20bn with secret surcharges

The US Federal Trade Commission (FTC) and 22 states have filed a lawsuit against Amazon, accusing the online giant of secretly and systematically overcharging advertisers over a period of years. According to the FTC, this conduct led to increased costs for consumers on essential goods sold on Amazon. Andrew Ferguson, the FTC chair, stated that millions of Amazon's advertising customers were misled into paying significantly higher prices, with the additional costs largely passed onto American consumers.

The agency claims that Amazon collected more than $20 billion from hidden surcharges, alluding to an "ad-rigging scheme". Amazon's advertising business has expanded dramatically in recent years, becoming the third-largest online advertising marketplace, behind Google and Meta. The lawsuit alleges that Amazon overcharged 1.2 million advertising customers since 2019, including over 500,000 small- and medium-sized businesses.

Amazon spokesperson pointed to a company blog post, calling the lawsuit a "misguided lawsuit", and denied the allegations. The FTC's case focuses on Amazon's advertising auction system, called "second-price auctions", where the winning bidder pays slightly more than the second-highest bid. Regulators allege that Amazon could secretly raise the second-highest bids using a higher "shill" bid of its own.

Amazon tested how much it could increase the amount it charges without advertisers noticing, with internal documents allegedly describing the company's pricing strategy as "hoping that advertisers don't notice and decrease bids or ad spend". The lawsuit seeks to bar Amazon from continuing these deceptive advertising practices, along with imposing civil penalties and refunding advertisers.