MARYLAND (WBFF) — Maryland Attorney General Anthony Brown joined 21 other attorneys general and the Federal Trade Commission (FTC) filed a lawsuit against Amazon, alleging the company “secretly inflated prices in its online search advertising auctions.”
The complaint, which was filed in the U.S. District Court for the Western District of Washington, alleges that for more than seven years Amazon has hiked the prices that over one million brands and sellers were required to pay in order to advertise on its platform.
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The complaint alleges that Amazon’s scheme has likely unlawfully taken billions of dollars from its “unwitting” advertising customers.
The FTC and coalition claim Amazon imposed undisclosed surcharges on its advertising customers. That includes more than 500,000 small- and medium-sized businesses that took part in auctions for advertising placements on Amazon.com and the company’s mobile app.
Advertisers bid to put Sponsored Product ads, Sponsored Brand ads and Display Ads alongside the results that come up when a customer searches for a product using a keyword on Amazon’s store. Officials said those placements are auctioned to the highest-ranking bidder for each keyword.
In the complaint, it alleges for years Amazon represented to prospective advertisers that the company runs “second price” auctions where the winner of the auction would pay “one cent more than the next highest bidder” for each successful bid. But, the complaint says Amazon charged its Sponsored Products advertisers more than winning bid nearly 80% of the time and converted its “second price” auction into a first price, which was different to the way auctions were described by Amazon on its website.
The lawsuit alleges Amazon’s scheme generated tens of billions of dollars of revenue by increasing the prices charged to advertisers on regular shopping days and applying even bigger increases to prices on busy shopping days like Prime Day and Black Friday.
The complaint also alleges Amazon spent years concealing the advertising changes from the public because the company knew it would receive “significant backlash.” The lawsuit alleges Amazon and its senior executives gave false and misleading answers to advertisers who asked the company directly if its had changed its auction format.
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