FTC Sues Amazon, Accusing the E-Commerce Giant of Misleading Advertisers (cnbc.com) 18
The FTC and 22 state attorneys general are suing Amazon, accusing the company of secretly inflating advertising prices through undisclosed changes to its auction system that may have extracted more than $20 billion from advertisers since 2019. "Amazon has millions of advertising customers who were misled into paying significantly higher prices," FTC Chairman Andrew Ferguson said in a statement. "These higher costs were largely passed on to American consumers." CNBC reports: The complaint, which was filed in U.S. District Court for the Western District of Washington, centers on Amazon's sponsored products ads, brands ads and display ads that run alongside search results on its sprawling webstore. Amazon has amassed the third-largest digital advertising business globally, trailing only Google and Meta. The company hauled in more than $68 billion in ads revenue last year, with the lion's share coming from sales of sponsored products ads. Third-party sellers who hawk their wares on Amazon's marketplace have recently criticized surging advertising costs on the site, including a string of recent policy changes, which led to some top merchants withholding their ad spend in a boycott. The company has traditionally used a "second-price" auction system, wherein it told advertisers they "only pay the least bid amount needed in order to win," the complaint states, citing Amazon's own marketing materials.
The FTC alleges in its complaint that Amazon in 2019 changed its auction rules without notice by adding an undisclosed surcharge it referred to as a "soft reserve price," which led to higher ad prices. "Amazon made this surreptitious change to its auction because it was unhappy about how much revenue its advertising auctions were generating," the agency said in its complaint, which cites internal communications between Amazon ad executives. In one exchange, a company executive allegedly acknowledged it uses an "invented auction participant" to increase prices, the FTC said. The FTC and the states alleged Amazon's practices violate federal and state consumer protection laws, and they're seeking civil penalties, restitution and other unspecified damages. In a blog post, Amazon called the FTC's lawsuit "misguided" and said the complaint "fundamentally misunderstands how advertisers operate." The company added that the agency's lawsuit doesn't include evidence of consumer price increases.
"We've provided advertisers with guidance about our auctions and pricing in the main tools they use to manage their campaigns, and we continue to update that guidance," the company said. "We look forward to making our case in court."
The FTC alleges in its complaint that Amazon in 2019 changed its auction rules without notice by adding an undisclosed surcharge it referred to as a "soft reserve price," which led to higher ad prices. "Amazon made this surreptitious change to its auction because it was unhappy about how much revenue its advertising auctions were generating," the agency said in its complaint, which cites internal communications between Amazon ad executives. In one exchange, a company executive allegedly acknowledged it uses an "invented auction participant" to increase prices, the FTC said. The FTC and the states alleged Amazon's practices violate federal and state consumer protection laws, and they're seeking civil penalties, restitution and other unspecified damages. In a blog post, Amazon called the FTC's lawsuit "misguided" and said the complaint "fundamentally misunderstands how advertisers operate." The company added that the agency's lawsuit doesn't include evidence of consumer price increases.
"We've provided advertisers with guidance about our auctions and pricing in the main tools they use to manage their campaigns, and we continue to update that guidance," the company said. "We look forward to making our case in court."
"We're not a monopoly" (Score:3)
- the words of every monopolist in human history.
Re: (Score:2)
I'm having a hard time seeing the third largest company in the field as a monopoly. I believe the correct term would be cartel, or conspiracy in restraint of trade.
Re: "We're not a monopoly" (Score:2)
There are multiple definitions of "monopoly" in different contexts (eg. economic vs. legal) ... but either way, you can say the same about "cartels", so feel free to mentally substitute.
Re: (Score:2)
There are multiple definitions of "monopoly" in different contexts (eg. economic vs. legal)
And none of them really apply to the third largest company in the field.
Re: (Score:2)
I guess this is the new reality (Score:5, Informative)
An FTC that works harder on behalf of advertisers than it does on behalf of consumers.
Not that they're wrong, but it's pretty telling that this is their focus when everyday people are being screwed over left and right by these too-big-for-accountability mega corps.
Re: I guess this is the new reality (Score:2)
An FTC that works harder on behalf of advertisers than it does on behalf of consumers.
seriously?
Did it escape you that Amazon Affiliates are the CONSUMERS and Amazon is the Big Business that is cheating its consumers?
This is about Amazon taking advantage/cheating Amazon Affiliates? That AMAZON, not the Affiliates, is the target of this action?
Wow.
Specific contracts are easier to prove (Score:2)
An FTC that works harder on behalf of advertisers than it does on behalf of consumers.
Not that they're wrong, but it's pretty telling that this is their focus when everyday people are being screwed over left and right by these too-big-for-accountability mega corps.
There are more details in an advertiser contract than your EULA and purchase agreement. Also, most advertisers are spending larger amounts of money and more likely to participate. The courts will always favor contract enforcement over class-action lawsuits. It's just very efficient and easy to go to trial about a B2B contract and courts have a lot more experience handling them....class action lawsuits are a MASSIVE mess, even when the case is obvious and airtight.
Big whoop! (Score:1)
Re: Big whoop! (Score:1)
It took Amazon 7 years to squeeze a purported $20BN from advertisers, so $1BN (your made up penalty which you invented to complain it wasn't a big enough penalty) is too low, I keep thinking of the line I hear from time to time asking for "treble damages" (that would be 3x the claimed amount Amazon cheated advertisers out of)...
Re: Big whoop! (Score:2)
I'd like to see Amazon be forced to refund advertisers the estimated amount they were overcharged - times 3... How does giving money to the govt help the cheated advertisers?
Advertisers (Score:2)
Forget or refuse to pay their bribes (Score:2)
OP considers {I HOPE} as {TELLING} FCC? (Score:1)
In the current context... (Score:2)