The US Federal Trade Commission and 22 states sued Amazon on Monday, alleging the company secretly manipulated its advertising auctions to overcharge more than a million advertisers. The complaint says the scheme has likely netted Amazon $20bn since 2019, while Amazon calls the case misguided.
FTC alleges hidden bids inflated ad prices
The FTC, joined by a bipartisan group of 22 US states, filed the complaint in federal court in the Western District of Washington on Monday. Regulators say Amazon overrode the results of its own ad auctions and replaced them with higher prices to boost profit.
Advertisers bid on Sponsored Products and Sponsored Brands placements that appear when shoppers search for items on Amazon's platform. Those placements are meant to go to the highest bidder in a "second price" auction, where the winner expects to pay one cent more than the next-highest bid. But the complaint alleges Amazon charged its Sponsored Products advertisers their own winning bid close to 80% of the time. The FTC and states also say advertisers' extra costs were passed on to shoppers.
Amazon shares fell about 2.5% on Monday after the lawsuit was announced. The FTC will seek damages in the tens of billions, according to an official, though a precise figure has not been set.
Amazon pushes back on consumer harm claims
Amazon disputes the allegations. According to Reuters: Amazon's approach to pricing contradicts any suggestion of consumer harm.
The retailer says its average cost per click for advertisers stayed flat from 2019 to 2024 even as sales generated from those clicks rose. It also said average winning bids fell 50% from 2019 to 2025 on Sponsored Products search ads, and that roughly 92% of placed ads are not given to the highest bid. Separately, the company says it saved advertisers roughly $8 billion between 2021 and 2025.
A second FTC fight in as many years
The company has clashed with the regulator before. In September last year, Amazon agreed to pay $2.5 billion in fines and refunds to settle allegations it enrolled Prime subscribers without consent and made cancellation difficult.
Amazon is now the world's third-largest digital ad company after Google and Meta. Its ad sales rose 26% in the second quarter of 2026 to $19.8 billion. Sales had also climbed 22% in 2025 to $68.6 billion. The company also faces a separate FTC suit next year over an alleged illegal monopoly on pricing power and its relationship with third-party sellers.
Sources: BBC News, Reuters via Investing.com
Trading involves risk.
Risk Disclaimer
