Amazon is now facing a major legal fight over its ad business. The US Federal Trade Commission (FTC) and 22 states say the company secretly pushed up ad prices and have filed a lawsuit for it. The case could put one of its fastest growing businesses under scrutiny.
Amazon hit with major ad lawsuit
As reported by The Hindu, the US Federal Trade Commission and 22 states have sued Amazon over the way it sets prices for online ads. The lawsuit says hidden charges made many businesses pay more than expected. The case says the alleged practice may have brought in more than $20B from about 1.2 million advertisers since 2019. More than 500,000 were small and medium-sized businesses. The lawsuit was filed in a federal court in Washington state.
The case covers ads shown when people search for products on Amazon. These include sponsored products, sponsored brands and sponsored display ads. Sellers bid for these spots, while the system decides which ads appear and their price. The FTC says Amazon told advertisers it used a second price auction. But regulators say the company later added a hidden surcharge and used a higher price.
FTC says Amazon hid higher costs
The complaint says Amazon began changing its auction system around 2018 and 2019. Regulators claim it used an undisclosed โsoft reserveโ price to raise ad costs. The complaint also says Amazon used what regulators describe as invented auction participants. The FTC says these extra bids could push up the amount paid by the real winner. The agency says the practice affected many auctions and raised Amazon’s revenue.
Regulators also claim Amazon tried to keep the pricing change away from advertisers. The complaint says some customers received misleading answers when they asked how prices were set. The lawsuit says the alleged conduct affected 1.2 million advertising customers, including more than 500,000 small and medium-sized firms. The FTC and states are seeking money and other remedies. The case is not a final court finding. The allegations must still be proved in court.
Amazon pushes back as case begins
Amazon has called the lawsuit misguided and flawed. The company says the FTC relied on selected internal documents and has not shown that shoppers were harmed. The company also disputes the idea that advertisers were simply forced to pay more. Amazon says its system considers bids, ad quality and the value of ads to shoppers. It also argues that advertisers can change their bids based on results. The dispute matters because advertising is now a major part of Amazon’s business.
However, this situation also has implications for sellers. There are many businesses that use sponsored listings to attract buyers, and if the court rules that the process was illegal, Amazon will have to change how its auctions and pricing work. For now, the FTC and the states have made their case, while Amazon prepares its defence. The final result will depend on the evidence and the court. The $20B figure is an allegation, not a confirmed penalty.
Author’s Opinion
The case raises a simple issue: businesses should know how they are being charged. That balance between business freedom, pricing, and clear disclosure now matters. Amazon has the right to defend its system, but clear rules matter. The court will decide whether the hidden pricing claims can be proved.
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