The Federal Trade Commission (FTC) has drafted a potential complaint against Amazon that could expose the company to billions of dollars in civil penalties over how it sells advertising, according to people familiar with the matter cited by Bloomberg on Tuesday.
The agency’s consumer protection unit has been digging into whether Amazon clearly disclosed the prices and terms behind the ads that dominate its marketplace, and several state attorneys general have joined the effort.
At the heart of the probe are the sponsored listings — the promoted products that appear at the top of the page when shoppers search Amazon.
Regulators are examining how the company runs the auctions that decide which ads win those spots, and in particular whether it told advertisers about “reserve prices,” the hidden minimum bids a seller has to clear to buy an ad.
The concern is that businesses paying to advertise may not have understood the real rules, or the real cost, of the system.
The stakes are large because advertising has become one of Amazon’s most important businesses.
The company brought in $68.6 billion in advertising revenue last year, according to a regulatory filing — a fast-growing and highly profitable line that spans search ads on its marketplace, video ads, and display ads shown across the web.
Analysts often describe it as the company’s “cash cow,” and a legal fight over how those ads are priced strikes directly at one of Amazon’s biggest profit engines.
How big the penalty could be remains an open question.
The FTC is limited in how much it can collect in fines on its own, but the involvement of state attorneys general matters because state consumer-protection laws can impose daily penalties that add up quickly.
People familiar with the matter said the agency could wrap up its investigation as soon as this summer, either by filing a lawsuit or reaching a settlement.
Any deal or lawsuit would need approval from the FTC’s two Republican commissioners, Chairman Andrew Ferguson and Commissioner Mark Meador.
Amazon did not immediately respond to requests for comment, and the FTC declined to comment.
This is far from Amazon’s first run-in with regulators.
In September, the company agreed to pay $2.5 billion to settle separate FTC claims that it used deceptive tactics to sign people up for Prime and made the service difficult to cancel.
Of that total, $1 billion was a civil penalty and $1.5 billion is being refunded to roughly 35 million customers, who have until late July to file claims.
The advertising case also lands on top of a larger legal threat.
Amazon is scheduled to go to trial early next year over FTC antitrust claims that it pressured brands into keeping prices high at rival retailers or risk losing visibility on its marketplace.
The agency has been scrutinizing the company since at least 2019, and a new complaint would mean fighting on two fronts at once.
Regulators are also examining Alphabet’s Google over similar questions involving advertising disclosures.
For everyday shoppers and the small businesses that sell on Amazon, the case touches something familiar.
Those sponsored results at the top of a search page are paid placements, and the fees sellers pay to land there can ultimately become part of the prices consumers see.
If regulators force greater transparency into how Amazon’s advertising auctions work, it could change what sellers pay and eventually influence what shoppers spend.
For now, Amazon’s stock — up nearly 16% over the past year — has barely reacted to the news.
But if the FTC formally files suit this summer, a quiet investigation could quickly become a very public fight over one of the company’s most profitable businesses.
Washington — JBizNews Desk
JBizNews Desk / © JBizNews.com All Rights Reserved. Reproduction or distribution without written permission is prohibited.
