Donald Trump’s FTC, joined by 22 states, sued Amazon on Monday, accusing the internet giant of secretly raising the minimum prices advertisers had to pay for ads.
The Wall Street Journal reports that the complaint states the practice cost advertisers more than $20 billion and pushed up prices for consumers. It began in 2018, according to the filing, and touched ads that show up when shoppers search on Amazon and its mobile app, including Sponsored Products, Sponsored Brands and Sponsored Display placements.
Amazon’s ad auctions were supposed to work like most online ad systems: the winning bidder pays only slightly more than the second-highest bid. The FTC’s complaint spells out the math. If the top bid is $15 and the next-highest is $12, the winner should pay $12.01. But starting in 2018, the FTC says, Amazon began altering some of these auctions in a way it believed advertisers would not notice. Internally, the company called the new approach a “soft reserve” pricing system. Rather than charge just above the second-highest bid, Amazon set higher prices after an auction had already concluded. Employees called these “post-hoc pricing adjustments,” according to the complaint, which also quotes an internal acknowledgment that “[a]dvertisers may not be expecting” the adjustments.
Amazon didn’t apply the soft-reserve structure to every auction. The complaint says the company intervened this way in 70 to 80 percent of auctions in recent years, and added a higher surcharge during the Christmas holiday season and other peak shopping periods.
Amazon runs the third-largest digital advertising platform in the world, behind Google and Mark Zuckerberg’s Meta. Amazon called the lawsuit “misguided” and said the FTC’s claims “fundamentally misunderstands how advertisers operate.”
FTC Chairman Andrew Ferguson wrote on X that the pricing practice “hit essential goods, like food and grocery items ordinary Americans rely on.”
Shaoul Sussman, a former associate director for litigation in the FTC’s Bureau of Competition, put the motive plainly. “It’s about raising rivals’ costs and adding Amazon’s bottom line,” he said.
Read more at the Wall Street Journal here.
Lucas Nolan is a reporter for Breitbart News covering issues of AI, free speech, and online censorship.