This Week In Blunders – Aug. 30-Sept. 5
“The table is tilted, folks. The game is rigged and nobody seems to notice.” – George Carlin
Amazon owns the store. It controls the shelves. It decides which products you see first. And it sells some of the best spots on those shelves to the highest bidder.
Now the government says Amazon was secretly bidding against its own advertisers.
The Federal Trade Commission and 22 states sued Amazon this week, alleging the e-commerce giant rigged its advertising auctions to squeeze tens of billions of additional dollars from businesses selling products on its site.
“When one of the world’s largest online retailers engages in unfair and deceptive conduct, the impact can be staggering,” said FTC Chairman Andrew Ferguson. “Amazon has millions of advertising customers who were misled into paying significantly higher prices. These higher costs were largely passed on to American consumers.”
Amazon denies the allegations, calling the case “misguided” and “patently false.” Now the courts will sort it out.
The complaint lays out how the alleged racket worked. Search Amazon for anything you want and many of the first products you see are “sponsored.”
Sellers bid for those spots in auctions that Amazon said were competitive. Amazon promised the winner would pay just a penny more than the next-highest bidder. But sometimes there was no next-highest bidder.
One Amazon executive acknowledged internally that the price sometimes “isn’t set by an actual bidder.” Another internal document called it an “invented auction participant.”
It’s like the auctioneer pointing to an empty chair and announcing, “I hear $500 from the gentleman in the back. Can I hear $500.01? Anybody?”
It sounds like Amazon’s imaginary friend was one of its best customers.
The FTC says that Amazon extracted tens of billions of dollars this way over seven years, beginning in 2019, cranking up the hidden surcharge even more on Prime Day and Black Friday. Internal documents warned that revealing how the auctions really worked could cause “irrevocable damage to advertiser trust.”
Call it a modern example of Adam Smith’s “invisible hand” of the economy. Only now it’s waving a paddle.
If he were alive today, he’d probably cancel his Prime membership.
How do you solve a problem like Maria?
Fox News says it has parted ways with Maria Bartiromo. Maria Bartiromo’s lawyer says reports that she was fired or no longer works for Fox are “absolutely and unequivocally false.”
Who to believe? The network that paid $787.5 million to settle Dominion Voting Systems’ lawsuit over election lies? Or the anchor who spent years lavishing praise on President Donald Trump while giving his election claims a remarkably friendly hearing?
Fox, obviously, has scrubbed Bartiromo from its shows.
Bartiromo was front and center in Fox’s disastrous embrace of Trump’s false claims that the 2020 election was stolen.
Her broadcasts figured prominently in the Dominion Voting Systems case, and she remains a defendant in Smartmatic’s $2.7 billion defamation suit over bogus election claims.
After paying dearly for its blunders, Fox may be signaling the White House that it is done spreading false election claims – and with the White House meddling in its editorial decisions.
Media reports say the network instructed its people not to amplify Trump's latest unsupported claims about the 2020 election. Bartiromo allegedly responded by sharing the internal directive with White House officials.
Sharing confidential editorial directives with a source would be a firing offense at many news organizations. If she wasn’t fired, she should have been … a long time ago.
How do you solve a problem like Maria? You change the locks. Or like in “The Sound of Music,” you make her go work for the von Trapp family.
The AG called ABC Plumbing. So it’s done?
“I called ABC. … So it’s done.”
Chicago-area homeowners have heard that reassuring pitch for years from ABC Plumbing, Heating, Cooling & Electric.
Now Illinois Attorney General Kwame Raoul has called ABC, suing the Arlington Heights, Ill.-based home-repair company for allegedly turning homeowner fears of broken furnaces, clogged pipes and electrical problems into a high-pressure sales strategy.
The state says ABC technicians sometimes showed up to fix one problem, wandered into other parts of customers’ homes and discovered additional “emergencies” or even “life-threatening hazards.”
Customers, often seniors, were allegedly pressured into authorizing expensive repairs, sometimes by signing tablets without a meaningful chance to read what they were signing.
Then there was the work. The lawsuit alleges some repairs were unnecessary, incomplete, shoddy or performed by unlicensed technicians.
One woman cited in the complaint was allegedly charged nearly $50,000 for sewer work that dragged on for months and involved tearing out parts of her basement wall. Her basement kept flooding. She finally called another company, which fixed the problem for $1,500.
ABC says it has served Chicago-area homeowners for more than 70 years and “earned their trust by operating with integrity.” The company has said it would respond after reviewing the complaint.
The attorney general called ABC. We’ll see what’s done.
This week’s Ponzi
Diamonds are forever. And so are Ponzi schemes.
This week, the Securities and Exchange Commission sued Mordechai Ferder, accusing the former CEO of luxury jeweler Lugano Diamonds of persuading wealthy investors to pour hundreds of millions of dollars into diamonds that Lugano allegedly didn’t own.
Instead of buying the diamonds, the SEC says Lugano made what it explicitly calls “Ponzi-like payments” back to investors, disguising them on its books as vendor purchases or deposits for future inventory.
The SEC says Lugano improperly booked investor money as sales, helping the jeweler and its publicly traded parent, Compass Diversified, report more than $1 billion in fictitious revenue.
Ferder’s lawyer has denied wrongdoing and says Compass knew about the financing arrangements.
After the alleged fraud unraveled, Compass, which trades on the New York Stock Exchange, had to restate three years of financial results. For 2024, Compass originally reported $230 million in operating income. After unraveling the Lugano accounting, it restated that figure to a $15 million operating loss.
Diamonds are forever. Imaginary revenue has a shorter shelf life.
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Some unicorns go to the glue factory
Unicorns, those rare billion-dollar startups that promise to disrupt the working world, are not always what they seem.
Elizabeth Holmes fooled high-profile investors like Rupert Murdoch and a wide swath of Silicon Valley.
Read more about her in the Business Blunders Hall of Shame.
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NFT Monkey Business Venture capitalists bet millions on a startup promising to build an exchange for cartoon apes. Prosecutors say founder Taj Tarsha blew investor funds on gambling and his DJ career.
Confessions Of An FBI Crypto Thief Prosecutors say agent Patrick Yaroch raided digital wallets. Then his conscience blew his cover.
Leaky Pants First came explosive diarrhea. Then came allegations of a $32 million inside job. It’s been one crappy summer for Taylor Farms.
How To Lose An Internet Fight eBay executives tried to silence a newsletter. It cost them tens of millions of dollars, seven criminal convictions, and one of the worst public-relations disasters in Silicon Valley history.
Another Billion-Dollar Bedtime Story Silicon Valley bet big on yet another young prodigy. Now they’re waking up to reality ... again.
Blowing Sunshine Jay Lucas preached positivity while looting his $50 million private equity fund
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The Nigerian Prince Goes Corporate A former Morgan Stanley broker allegedly gave the classic scam a Wall Street makeover
AI Eats IBM The computing giant spent three years serving investors an artificial intelligence feast. This week, it found itself on the menu.
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The Wells Fargo Fraud Wagon From fake accounts to mortgage abuses, this bank keeps rolling through scandals. Its latest delivery: $50 million settlement over claims it enabled a Ponzi scheme.
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The election was stolen. It is coming out.