WASHINGTON, D.C. — The Federal Trade Commission and 22 states, including New Jersey, have released new details in a lawsuit accusing Amazon of secretly manipulating its online advertising auctions to inflate prices, sometimes by as much as 250%, while misleading advertisers about the reasons for the increases.
The newly unredacted allegations, made public in an updated complaint, describe how Amazon allegedly imposed hidden surcharges on advertisers to increase revenue and meet corporate financial targets. The FTC and participating states originally filed the lawsuit in August in the U.S. District Court for the Western District of Washington.
According to the complaint, Amazon allegedly increased advertising prices by as much as 50% above auction results on ordinary shopping days and by as much as 250% during major shopping events, including Prime Day and Black Friday. The alleged practices affected advertisers of various sizes, including small businesses and major corporations, while generating substantial additional revenue for Amazon.
During the 2021 holiday shopping season, Amazon allegedly increased advertisers’ average cost per click by 20%, with some advertisers experiencing increases exceeding 200%, according to the complaint. During the 2022 holiday season, the company allegedly raised its hidden surcharges to generate an additional $87 million in worldwide revenue.
The complaint also details the impact on individual advertisers. During Prime Day in 2023, one large food and beverage advertiser reportedly experienced advertising price increases exceeding 100%. According to the FTC, Amazon internally acknowledged that the higher advertising costs reduced the advertiser’s return on advertising spending and were “destroying campaign performance.”
The newly disclosed allegations also describe how Amazon executives allegedly used the hidden surcharges to help meet financial targets. In 2023, company executives discussed finding an additional $40 million in revenue to close a gap in corporate financial projections, according to the complaint.
The head of Amazon Ads reportedly sent an email to Amazon’s senior vice president of advertising products and technology discussing efforts to generate additional revenue.
“I’d like to pull out all of the stops (without doing unnatural acts) to close our gaps to plan. I suspect that the entire gap won’t be closed, so whatever can be done with reserves (ideally at least $40MM would be helpful).”
Federal and state officials also allege that Amazon misled advertisers who questioned unexpected increases in advertising costs. According to the complaint, some advertisers specifically asked whether Amazon had changed its second-price auction process, which determines advertising costs. Rather than disclosing the alleged hidden surcharges, Amazon representatives attributed the increases to greater competition among advertisers.
In one instance, an advertiser asked whether “something has changed with respect to the second price auction process, either by design or mistake.” An Amazon account manager responded:
“After reaching out to the product specialist team we were informed there is not a bug, or a change in auction style, so no worries there. This year the marketplace is even more crowded than any year previous, and we are seeing the spike in CPCs [costs-per-click] as a direct reflection.”
The FTC alleges that those explanations concealed Amazon’s own role in increasing advertising prices beyond the amounts determined through its auction system.
The lawsuit was brought by the FTC and attorneys general from 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.
The updated complaint makes public previously redacted allegations concerning the extent of the alleged price increases, their impact on advertisers and internal communications about Amazon’s advertising revenue goals. The allegations remain part of ongoing litigation and have not been established as findings of fact by a court.
