Amazon Faces Class Action Lawsuit in Israel Over Ad Pricing Practices

Amazon is the subject of a class action lawsuit request filed with the Central District Court in Lod, Israel, alleging the company used a different ad pricing mechanism than what was presented to advertisers. The lawsuit claims Amazon charged advertisers higher amounts for clicks than it indicated, potentially causing tens of millions of shekels in damages to Israeli advertisers. The request was filed by Pathosio Ltd., an Israeli company that sells pet products to U.S. consumers via Amazon and manages its advertising from Israel. Pathosio claims it spent approximately $727,000 on sponsored advertising on the platform between May 2022 and September 2026.

The Israeli lawsuit is partly based on a U.S. Federal Trade Commission (FTC) lawsuit, filed in August with 22 states, against Amazon. The Israeli filing asserts that internal Amazon documents revealed during the U.S. proceedings demonstrate how the company altered its advertiser pricing mechanism. According to the request, Amazon presented advertisers with a "second-price auction" model, where the winning bidder pays slightly more than the second-highest bid. However, Pathosio alleges that since late 2018 and more broadly in 2019, Amazon began using a "soft reserve" mechanism. This allowed Amazon to increase the price charged to the winning advertiser, sometimes up to their full bid amount, after the ad placement was already determined.

Pathosio contends that advertisers had no way of knowing the second-highest bid, making it impossible to verify if they were overcharged. The lawsuit cites internal Amazon documents suggesting the company did not disclose this "add-on" to advertisers, allowing them to assume pricing still followed the second-price auction model. Claims include consumer deception, breach of contract, breach of good faith, negligence, and misrepresentation, as well as unjust enrichment. Pathosio claims it was overcharged by 21,803 shekels. A preliminary economic assessment attached to the request estimates the pricing mechanism added about 1% to advertisers' costs on average, leading to an estimated total damage of tens of millions of shekels for the class.

Amazon has denied the allegations in the U.S. proceedings, stating that advertisers never pay more than their bid and that the FTC misrepresented its advertising system. The company argued that ad selection is not solely based on bid amount, with 92% of ads in 2024 not being the highest bidders. Amazon also claimed that advertisers saved over $8 billion compared to a highest-bid-only system and that average click prices remained stable. The company further asserted that using reserve prices is common in the advertising industry and that some FTC documents are old and limited in scope. Pathosio counters that Amazon's explanations do not address the core issue of how the final price is determined after a winner is selected.

The court has not yet decided whether to certify the lawsuit as a class action, meaning Amazon has not been found to have violated any laws at this stage, and all claims are currently unproven.