Amazon is facing a potential lawsuit from the U.S. Federal Trade Commission (FTC) that could result in billions of dollars in civil penalties. The FTC's drafted complaint centers on claims that Amazon misled advertisers, specifically regarding the terms and pricing of its advertisements, often referred to as "sponsored listings" or "sponsored ads" on its marketplace. Multiple state attorneys general are also involved in the investigation, which could circumvent limitations on the FTC's ability to impose monetary penalties, as state consumer protection laws allow for substantial daily fines.
The probe, led by the FTC's consumer protection unit, intensified last year and has focused on whether Amazon properly disclosed details of its ad auctions, including "reserve pricing" – the minimum price advertisers must meet to purchase an ad. This investigation targets a crucial growth area for Amazon, as its advertising business generated $68.6 billion in revenue last year. Digital advertising has become increasingly dominant, with Amazon ranking as the third-largest online advertising company, behind Google, which is also under FTC investigation for similar concerns.
The FTC's scrutiny of Amazon extends beyond this advertising probe. The agency has been investigating various aspects of Amazon's business since at least 2019. Last fall, Amazon agreed to pay $2.5 billion to resolve a separate consumer protection investigation concerning its Prime subscription practices. Furthermore, a trial is scheduled for early next year regarding the FTC's antitrust claims that Amazon has coerced brands into raising prices at competing retailers or face reduced visibility on its platform. In a related complaint, the FTC has also alleged that Amazon doubled the number of ads in search results and deleted internal messages to evade federal probes.
