Amazon Allegedly Bid Against Its Own Advertisers for 7 Years, Costing Them More Than $20 Billion
A federal complaint alleges Amazon inserted a “soft reserve” into seller ad auctions, raising prices while keeping advertisers in the dark.
For seven years, Amazon allegedly bid against itself, and its own advertisers never knew.
The Federal Trade Commission (FTC) sued Amazon, accusing the company of secretly rigging its advertising system to squeeze more money out of the businesses that sell products on its platform.
This week, more than 20 state attorneys general, including those from New York, California, and Florida, joined the lawsuit, which alleges the scheme generated tens of billions of dollars for Amazon over seven years.
When one of the world’s largest online retailers
“When one of the world’s largest online retailers engages in unfair and deceptive conduct, the impact can be staggering,” FTC Chairman Andrew N. Ferguson said. “Amazon has millions of advertising customers who were misled into paying significantly higher prices. These higher costs were largely passed on to American consumers. The FTC under President Trump won’t allow this deception to continue.”
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Under Amazon’s ad system, merchants pay to run ads that push their products higher up when shoppers search. Historically, that price got set through a fair auction, sellers then bid against each other, and the price was based on those competing bids. This is where things allegedly changed.
Starting in 2018, according to the FTC, Amazon began quietly inserting its own fake bid into the auction, something executives internally referred to as a “soft reserve.” Since Amazon could see what every other advertiser was bidding, it could then set that fake bid just high enough to drive up the final price, all without merchants ever realizing Amazon itself was the one pushing costs up.
The FTC also alleges that Amazon tracked the extra revenue this scheme generated internally as a “surcharge,” and deliberately limited how many people inside the company knew about it out of concern advertisers would eventually catch on.
Source: www.inc.com
