The U.S. Federal Trade Commission (FTC) is reportedly preparing to sue Amazon.com Inc. over allegations of deceptive advertising practices, specifically focusing on how Amazon operates its advertising auctions and discloses terms to advertisers and marketplace sellers. This potential lawsuit could result in multi-billion dollar penalties for Amazon, along with the imposition of new compliance requirements for its advertising business.
This action targets a significant and growing revenue stream for Amazon; its advertising business generated $68.6 billion in revenue last year. The investigation, which intensified in the past year, centers on whether Amazon properly disclosed the terms and pricing for its "sponsored listings" or "sponsored ads." The FTC is also examining whether Amazon disclosed "reserve pricing," which are price floors that advertisers must meet to purchase an ad. Multiple state attorneys general are reportedly involved in the investigation, and their participation could enable the collection of substantial monetary penalties, circumventing some federal restrictions.
While this specific FTC action focuses on advertising practices, Amazon has faced broader regulatory scrutiny. The company recently agreed to pay $2.5 billion to resolve a separate consumer protection probe related to its Prime subscription practices. Furthermore, a trial is scheduled for early next year concerning FTC antitrust claims that Amazon forces brands to raise prices at competing retailers or face reduced visibility on its marketplace.
