FTC makes public new pages of its Amazon ad auction case

What happened

The Federal Trade Commission and 22 states made public on Thursday 5 November a less redacted copy of their complaint accusing Amazon of secretly inflating prices in its search ad auctions. ^{[1, 3]}

The FTC's release is titled 'New Details Emerge in Amazon Ads Auction-Rigging Case'. The court's stamp shows the 181-page document was filed on Wednesday 28 October in the US District Court for the Western District of Washington. The case itself was first filed on Monday 31 August. ^{[1, 2, 3, 8]}

Why it matters

Advertising is a large part of Amazon's business: its filed advertising services sales were $19.6 billion in the three months to Wednesday 30 September, against $17.7 billion a year earlier. The FTC asks for a court order and money, and the states also seek civil penalties and restitution. Amazon's quarterly report says it disputes the allegations and intends to defend itself vigorously. ^{[3, 6]}

What the new pages say

After each auction runs, the complaint says, Amazon swaps the auction price for a higher 'soft reserve' price. That surcharge can lift prices by as much as 50 percent on ordinary days and 250 percent on days like Prime Day or Black Friday, the FTC said. ^{[1, 3]}

In the 2021 holiday season the average cost per click went up 20 percent, and some advertisers saw increases of more than 200 percent, according to the complaint. An internal memo credited a gentler approach in the 2022 holidays with more than $87 million in added revenue worldwide. ^{[1, 3]}

In 2023, with Display Ads set to miss plan by $40 million, the head of Amazon Ads wrote that 'whatever can be done with reserves' would help. When advertisers asked about rising costs, an account manager replied there was 'not a bug, or a change in auction style', the FTC said. ^{[1, 3, 4]}

Amazon's answer

Amazon called the case 'a misguided lawsuit' on Monday 31 August and said that 'in no scenario does an advertiser pay more than their bid.' It also said that 'a stray email is not indicative of a team's intent'. Search Engine Journal reported that the FTC's newest release carried no public response from Amazon to the unsealed details. ^{[5, 4]}

Where the sources differ

The FTC's release says one large food and beverage advertiser faced increases of more than 100 percent on Prime Day 2023. The complaint quotes that advertiser's account manager reporting increases of 90 percent or more, and the team reporting surcharge increases of over 100 percent on three campaigns. ^{[1, 3]}

On the total, the FTC's August release said Amazon has likely taken 'tens of billions of dollars' from advertisers. New York's attorney general put the overcharges at more than $20 billion, FoodNavigator reported. ^{[2, 7]}

What settles it next

The FTC's release and the reports read name no next date in this case. Amazon's quarterly report lists a second suit over the same reserve prices, brought by Texas in a state court in Collin County. Search Engine Journal noted that the release does not say whether the surcharges continued past 2023. ^{[1, 4, 6]}

Who it reaches

Amazon.com (AMZN) is direct: it is the defendant, and the sales at issue are reported in its advertising services line. The food and beverage advertiser is not named in the public copy. ^{[3, 6]}