Maryland Joins Suit Against Amazon Over Hidden Ad Fees

State of MD - Maryland is one of 22 states suing Amazon over how the company charges for online ads. Attorney General Anthony G. Brown and the Federal Trade Commission filed the complaint today in the U.S. District Court for the Western District of Washington.

The lawsuit claims Amazon secretly raised prices in its advertising auctions for more than seven years.

According to the complaint, this affected more than one million brands and sellers who advertise on Amazon.

Officials say the scheme brought in tens of billions of dollars for Amazon. More than 500,000 small and medium sized businesses were among those who bid on ad placements through the company.

These ads show up when a shopper searches for a product on Amazon. Businesses bid on keywords, and the highest bidder gets the ad spot next to the search results.

For years, Amazon told advertisers it ran a "second price" auction. The company said winners would only pay "one cent more than the next highest bidder."

The complaint alleges that is not what happened. It claims Amazon charged advertisers more than the winning bid close to 80 percent of the time, turning it into what was effectively a first price auction.

The lawsuit also points to a 2024 conversation between Amazon's head of Ads and its Chief Digital Economist. In that discussion, the two called the pricing method a "clever non-transparent way to charge first price" and an "incredibly effective way to drive revenue."

Officials say Amazon increased these surcharges even more on big shopping days like Prime Day and Black Friday. The complaint claims Amazon slowly raised the extra charges before those events so advertisers would not notice the change.

The lawsuit also alleges Amazon gave false answers when advertisers asked directly if the auction had changed. Company documents cited in the complaint reportedly warned that being honest about the surcharges could cause "irrevocable damage to advertiser trust" and a "downward spiral" in revenue.

Along with Maryland, the states joining the lawsuit are Alaska, Arizona, California, Colorado, Florida, Idaho, Illinois, Indiana, Iowa, Kentucky, Louisiana, Nebraska, New Jersey, New York, North Carolina, Oklahoma, Pennsylvania, Rhode Island, South Carolina, Vermont, and Washington.