The Federal Trade Commission and 22 states say Amazon secretly raised what advertisers paid in its search ad auction, by as much as 50% on ordinary days and as much as 250% on days like Prime Day, according to an updated complaint the agency described on Nov. 5. The Amazon ads lawsuit was filed in August in U.S. District Court for the Western District of Washington.
The unredacted filing adds internal emails and figures to the original claim. The allegations are unproven, and no court has made a finding against Amazon.
What the Updated Complaint Alleges
The FTC alleges Amazon charged advertisers more than the auction’s own results called for. The complaint puts the markup at up to 50% above auction results on ordinary days and up to 250% on major shopping days. On those peak days the alleged markup is five times the ordinary-day ceiling, a calculation from the two figures.
The complaint gives dated examples. During the 2021 holiday season, average cost per click rose 20%, and some advertisers saw increases of more than 200%. For the 2022 holiday season the complaint says the surcharges produced $87 million in additional revenue worldwide. During Prime Day 2023, one large food and beverage advertiser allegedly faced increases of more than 100%, and Amazon allegedly acknowledged internally that the increases were “destroying campaign performance.”
The Revenue Targets in Amazon’s Emails
The complaint ties the surcharges to financial goals. In 2023, it alleges, executives discussed finding an additional $40 million to meet corporate targets. The head of Amazon Ads allegedly wrote to the senior vice president of ad products and technology that he wanted to “pull out all of the stops” to close gaps to plan. The FTC does not name either executive. The alleged 2022 holiday surcharge revenue of $87 million is more than twice the $40 million the executives allegedly discussed for 2023, a calculation from the two figures.
What Amazon Told Advertisers
The complaint says advertisers asked whether something had changed in Amazon’s second-price auction, the format in which a winning bidder pays just above the runner-up’s bid. Amazon allegedly told them the increases reflected more competition. In one exchange the complaint quotes, an account manager allegedly wrote that the team had been told there was no bug and no change in auction style. If that account is accurate, advertisers believed they were bidding against each other when part of what they paid was set by Amazon. That is the claim the case will test, and the FTC’s attached numbers give the court a specific amount to look for.
The 22 states that joined the FTC are 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. Amazon’s answer to the updated complaint is the next filing in the Western District of Washington.
