WASHINGTON – The US Federal Trade Commission (FTC) and 22 states filed a lawsuit against Amazon on Monday, accusing the online retailer of artificially inflating the prices companies paid for advertising on its platform and potentially earning tens of billions of dollars as a result.
For more than seven years, Amazon secretly increased prices in advertising auctions, the FTC said. Attorneys general from 22 states joined the lawsuit, reported German news agency dpa.
“These higher costs were largely passed on to American consumers,” FTC Chairman Andrew Ferguson said. “When one of the world’s largest online retailers engages in unfair and deceptive conduct, the impact can be staggering,” he added.
Amazon shares were down about 2.5 per cent on Monday.
Companies can pay Amazon to have their advertisements displayed alongside certain search results. The advertising slots are allocated through auctions.
Under Amazon’s stated auction system, the highest bidder does not have to pay its full bid but only one cent more than the second-highest bid. For example, if one company bids US$200 and another bids US$190, the winning company would pay US$190.01 for the advertising slot, according to the FTC.
But Amazon charged the full winning bid in almost four out of five product advertising auctions, the FTC alleged, violating its own stated rules.
The FTC said internal company documents provide evidence of the practice, including references to “a surcharge hidden” in its auction pricing. Amazon also allegedly drove up prices by using fictitious bidders in the auctions.
According to the lawsuit, Amazon introduced the secret price increase because it was dissatisfied with the revenue generated from its advertising auctions.
–BERNAMA-dpa
