Amazon’s Hidden Hand: Unfair Advantage in Online Advertising

The latest lawsuit against Amazon is a stark reminder of the company’s influence in the online marketplace. The Federal Trade Commission (FTC) and 22 states have joined forces to take down Amazon over allegations that it secretly inflated prices in its online search advertising auctions, potentially costing customers tens of billions of dollars.

At first glance, this is a story about digital advertising, but scratch beneath the surface and you’ll find a tale of how Amazon’s market dominance affects small businesses, consumers, and the broader economy. For years, Amazon has touted its platform as a level playing field for sellers to reach customers. However, the latest lawsuit alleges that the company engaged in unfair and deceptive conduct by inflating prices through hidden surcharges.

The alleged scheme revolves around second-price auctions, the industry standard for digital ad deals. In theory, these auctions ensure advertisers pay only one cent more than the second-highest bidder for a keyword. But according to the FTC and states joining the suit, Amazon charged the winners their own price about 80% of the time, resulting in higher costs for businesses. These increased costs were largely passed on to American consumers.

The scope of this alleged scheme is staggering, with over 1 million Amazon brands and sellers required to pay for advertising on its platform. The potential losses are in the tens of billions of dollars, raising important questions about the role of online marketplaces like Amazon in shaping consumer behavior and economic outcomes. By allowing a single company to wield such influence, we risk creating a system where the strong prey on the weak.

Amazon’s response to the lawsuit has been swift and dismissive. The company claims that the average winning bids for sponsored product ads dropped 50% from 2019 to 2025, implying that advertisers benefited from its pricing practices. However, this argument ignores the fact that many small businesses rely on Amazon’s platform to reach customers and drive sales.

Internal documents cited in the FTC’s complaint suggest a culture of complicity within Amazon. Employees allegedly discussed raising prices while “hoping that advertisers don’t notice and decrease bids or ad spend.” This culture of opacity allows companies like Amazon to engage in unfair practices without being held accountable.

The lawsuit makes clear that the stakes are high for both consumers and small businesses. The FTC and states are seeking a court order to bar Amazon from pursuing this alleged scheme and to require the company to pay penalties, restitution, and other damages. This could be an important step towards reining in Big Tech’s influence over online marketplaces.

Regulators must take a closer look at how online platforms like Amazon operate. By promoting transparency and fairness, we can create a more level playing field for small businesses and consumers alike. Policymakers have a choice: will they rise to the challenge and address Amazon’s dominance, or will they continue to enable it?

Ultimately, this lawsuit serves as a reminder of the need for greater accountability in the tech industry. As Amazon’s influence continues to grow, so too does its capacity for harm. By shining a light on its practices and holding it accountable, we can work towards creating a more just and equitable online marketplace – one where small businesses have a fair shot at success, and consumers are protected from hidden surcharges and other unfair practices.