Amazon is misleading consumers with 'deceptive' ads in search results, FTC complaint says

By Jennifer Korn

    (CNN) -- Amazon is potentially misleading consumers by not being clear enough in indicating which of its search results are paid advertisements,according to a complaint filed with the Federal Trade Commission on Wednesday.

More than a quarter of Amazon search results are sponsored by third parties and not adequately labeled to make that obvious to the average user, according to the complaint, which was filed by The Strategic Organizing Center (SOC), a coalition of US labor unions. Researchers at SOC, who analyzed more than 130,000 search results, allege that Amazon was in violation of all FTC guidelines for identifying online ads in search results, the complaint said.

"It's really the combination of how often the advertisements on Amazon platforms are deceptive, together with how prevalent the ads are among all of its search pages, that really calls into question for us whether Amazon's entire search platform itself is deceptive," SOC research director Joan Moriarty told CNN Business.

In a statement to CNN Business, an Amazon spokesperson called the SOC's report "incorrect" and said it "misstates FTC guidance." The spokesperson added:"Ads in Amazon's store always include a clear and prominent 'sponsored' label, implemented in accordance with FTC guidelines."

"We design our store to help customers discover products we think may best meet their needs -- sponsored ads is one of the ways to help them find products they may be interested in," the spokesperson said.

The FTC did not immediately respond to a request for comment on this story.

The FTC requires digital advertisers to have clear and conspicuous labeling of paid ads. In order to protect consumers, the FTC considers a deceptive advertising practice one that contains a statement or omits details that are "likely to mislead consumers acting reasonably under the circumstances" and that will "likely affect the consumer's conduct or decisions with regard to a product or service."

Online search engine results are required to use shading, borders and large text boxes placed to the left in order to label paid products. If an ad is mislabeled or appears to the common eye not to be sponsored, that would be considered deceptive.

Amazon uses the same gray shading for advertised products and organic search results, potentially confusing consumers, according to the complaint. While paid results do get text labels saying "sponsored," these labels are in small, light writing and hidden under larger labels like "Today's deals," the complaint says. The larger labels are also often used for non-sponsored products shown by organic searches, potentially making it even harder for consumers to identify paid search results, according to the filing.

The report also alleges that Amazon uses "lazy loading" of ad labels, meaning that "sponsored" labels load up to three seconds after the rest of the ad has loaded on the search result page.

Amazon's advertising business is a fast-growing division for the company. Amazon's "Other" business segment, which is primarily made up of advertising services, generated $8 billion in revenue in the third quarter.

The SOC's complaint comes at a time of potential renewed scrutiny from the FTC.Lina Khan, a critic of big tech, assumed the role of FTC chair in June. In a 2017 article written for the Yale Law Journal, Khan highlighted antitrust issues with Amazon. Shortly after Khan was appointed to the role, Amazon filed a formal request that Khan berecused from all Amazon-related antitrust cases brought before the FTC.

In her short tenure as chair, Khan has already worked to strengthen the power of the FTC. A July vote rescinded a 2015 policy restricting how officials could bring cases against violators of antitrust laws, making it easier to go after corporations like Amazon.

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