The FTC and 22 states sued Amazon on Monday, alleging the company secretly inflated advertising auction prices and extracted more than $20 billion from marketplace advertisers. Amazon called the complaint misguided and says its auction tools have saved advertisers money, not cost them.
Amazon shares fell 3% on Monday after the Federal Trade Commission and 22 state attorneys general filed a lawsuit accusing the company of manipulating the prices merchants pay to advertise on its marketplace. The FTC says Amazon may have reaped more than $20 billion from advertisers through what it calls hidden surcharges.
FTC alleges hidden ad surcharges
Regulators say Amazon intervened in its own ad auctions to artificially raise minimum prices 70% to 80% of the time, reportedly pushing merchant ad costs up during peak shopping events such as Prime Day. Internal documents cited by the FTC show Amazon executives worried that disclosing the practice would damage advertiser trust and prompt lower bids, cutting into the company's revenue.
FTC Chairman Andrew Ferguson said in a statement announcing the lawsuit: "Amazon has millions of advertising customers who were misled into paying significantly higher prices." The scheme, the FTC says, overcharged about 1.2 million advertising customers, including more than 500,000 small and medium-sized businesses.
Amazon pushes back
Amazon called the lawsuit misguided in a blog post responding to the complaint, arguing it fundamentally misunderstands how advertisers operate and includes no evidence that shoppers paid more as a result. The company said its auction systems saved advertisers $8 billion between 2021 and 2025, not the reverse.
The lawsuit, filed in the Western District of Washington, traces the alleged scheme to a change Amazon made to its auction rules in 2019.
Third FTC case against Amazon
Monday's suit marks the FTC's third major case against Amazon. Last September, the company paid $2.5 billion to settle allegations that it deceived consumers into Prime subscriptions and made cancellation difficult. Amazon also faces a separate antitrust trial next year over claims it used monopoly power to inflate prices and squeeze third-party sellers.
Amazon's advertising business, the third-largest digital ad platform globally behind Google and Meta, generated $19.8 billion in revenue last quarter.
Sources: MarketWatch.com, CNBC, Financial Times
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