(Juneau, AK) – Monday, Acting Attorney General Mills joined a bipartisan group of twenty-two States and the Federal Trade Commission in a lawsuit against Amazon, alleging that Amazon has systematically and secretly overcharged its approximately 1.2 million advertising customers by manipulating the auctions that it uses to set the price of ads on its platform.

“Amazon is the biggest online retailer in the country. When a business of that size takes advantage of its position, there must be consequences,” said Alaska Governor Mike Dunleavy. “It is unacceptable for a tech giant like Amazon to increase its profits by deceiving Alaskan businesses.”

“The way Amazon abused its role as auctioneer resulted in businesses around the country, including Alaskan small businesses, being overcharged for their advertisements,” said Acting Alaska Attorney General Cori Mills. “This doesn’t just matter for businesses: when Amazon increases the cost to advertisers on its platform, the natural consequence is for those costs to be passed on to consumers in the form of higher prices. Amazon needs to do better.”

Amazon told its advertising customers that it runs a “second-price auction” to determine ad placements: once the advertisements were ranked according to relevance and bid price the winning bidder would only pay the amount necessary to beat the second-ranked bidder. A second price auction encourages bidders to bid no less than what they believe the thing being auctioned is actually worth to them, since it eliminates the risk of paying more than was necessary to beat the competing bidders. But Amazon did not charge its advertisers the minimum price that was necessary to beat the second-ranked competing bid. Instead, it artificially set the price that would be charged to the advertiser. As explained internally by Amazon’s Senior Vice President in charge of Amazon Ads, in Amazon’s auctions “the second price isn’t set by an actual bidder, but rather by” Amazon in the form of a “proxy 2nd price that we calculate.”

The lawsuit has been filed in the Federal Court for the Western District of Washington. You can view the complaint and the Federal Trade Commissions’ press release here:

FTC, States Sue Amazon Over Secret Ad Surcharge Scheme | Federal Trade Commission

Joining Alaska and the Federal Trade Commission in this lawsuit are Arizona, California, Colorado, Florida, Idaho, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maryland, Nebraska, New Jersey, New York, North Carolina, Oklahoma, Pennsylvania, Rhode Island, South Carolina, Vermont, and Washington.