AMZN Faces FTC Scrutiny Over Ad Pricing And Disclosures — Probe Could Spark Massive Penalties, Says Report

• The US Federal Trade Commission has reportedly drafted a potential complaint against Amazon over alleged ad-related misconduct.
• Multiple state attorneys general are also involved in the ongoing investigation, according to a report in Bloomberg.
• Advertising, which generated $68.6 billion in revenue last year for Amazon, is the central focus of the probe.

Amazon.com Inc. (AMZN) is reportedly facing the possibility of a lawsuit from the US Federal Trade Commission that could lead to billions of dollars in civil penalties over allegations that the company misled advertisers.

The FTC has already drafted a potential complaint as part of an ongoing investigation into the e-commerce giant, reported Bloomberg, adding that multiple state attorneys general are also involved in the probe.

On Tuesday, AMZN shares were down 0.08% in after-hours trading, after having ended the regular session 0.01% down. 

AMZN Ad Auctions Also Under Scrutiny

At the center of the probe is Amazon’s advertising operations, particularly whether the company properly disclosed pricing and terms tied to “sponsored listings” that appear at the top of search results on its platform, stated the report.

The investigation also includes scrutiny of Amazon’s ad auctions and whether “reserve pricing,” which is the minimum price thresholds for advertisers, were adequately disclosed.

The investigation could reportedly conclude as soon as this summer, either through a settlement or a formal lawsuit. Any resolution would require approval from the FTC’s two Republican commissioners, Chairman Andrew Ferguson and Commissioner Mark Meador.

While the FTC faces limits on obtaining monetary penalties on its own, state-level consumer protection laws could significantly increase financial exposure, with daily fines that could quickly accumulate depending on ad volumes, stated the Bloomberg report, citing people familiar with the matter. 

AMZN Growth Driven By Advertising

Advertising has become a key growth driver for Amazon, generating $68.6 billion in revenue last year, according to company filings. This includes search ads within its marketplace as well as display and video advertising across the web.

The FTC has previously examined multiple aspects of Amazon’s business since 2019, and the company has already faced a $2.5 billion settlement last year over a separate consumer protection probe. A trial related to broader antitrust allegations is also scheduled for early next year.

How Do Retail Traders Feel About AMZN?

Retail sentiment for AMZN on Stocktwits was ‘bullish,’ unchanged in the past week, while message volume was ‘high.’

Message volume around the stock surged 487% in the past 30 days, while its retail watcher base rose 0.2% in the same period, and 0.5% in the last 90 days.

AMZN stock has gained nearly 16% in the past 12 months.

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