The opacity of the algorithm: Amazon faces a historic legal front in the United States for advertising manipulation
A bipartisan coalition made up of 21 U.S. states and the Federal Trade Commission (FTC) has filed a formal lawsuit against Amazon, accusing it of secretly and systematically manipulating the mechanisms for setting advertising prices within its platform.
A systematic charge on a large scale
According to the court file, the e-commerce technology company allegedly implemented schemes that allowed it to improperly capture over $20 billion from approximately 1.2 million customers from its advertising business. Among the primary victims of this scheme are small and medium-sized enterprises (sellers) that depend on the platform to give visibility to their products.
Prosecutors argue that Amazon's practices intensified during peak consumption seasons:
- Consumption spikes: The largest rate increases were identified during high-demand commercial events, specifically on Black Friday and Prime Day.
- Internal mechanism: Internal documentation seized from the company reveals that employees referred to these settings informally as "hidden surcharges" (hidden surcharges).
- Inflationary effect: Letitia James (Attorney General of New York) pointed out that this cost pressure was not absorbed by the merchants, but rather was directly passed on to the final prices of the products, raising the shopping basket for ordinary consumers.
The implications for consumer protection
The lawsuit strongly contends that the auction schemes employed by the firm violate federal and state consumer protection laws, including the FTC Act. This statute explicitly prohibits unfair, deceptive trade practices and false advertising in the U.S. market. This trial opens a complex scrutiny front that could redefine the transparency schemes of automated advertising auctions globally.
From the editorial perspective of next+, the lawsuit against Amazon Ads highlights the dark side of Retail Media. The rapid growth of this advertising sector has rested on the promise that retailers have unmatched transactional data to close the loop between the advertisement and the sale. However, when the owner of the showcase is simultaneously the administrator of the advertising space auction and the owner of the market, the conflict of interest is evident. This trial will force major Commerce Media platforms to open their methodologies and submit their bidding algorithms to independent audits if they wish to maintain advertisers' trust and prevent regulation from fragmenting the lucrative retail advertising business.