The US Federal Trade Commission, alongside 22 states, has launched fresh legal proceedings against Amazon, charging the company with covertly inflating charges for more than a million advertisers by manipulating the platform’s ad pricing auctions.
Filed on Monday in Washington state, the lawsuit asserts that Amazon amassed about $20 billion in extra revenue from advertisers since 2019 through these practices. The FTC and a bipartisan alliance of state attorneys general allege that Amazon tweaked the auction system to boost profits, a move that has affected suppliers and may have led to higher expenses for consumers.
Claims of Auction Price Manipulation From FTC and States
The legal filing contends that Amazon actively intervened in the outcome of ad auctions for Sponsored Product and Sponsored Brand placements, bypassing what would be typical auction protocols that generally lower prices. Rather than adhering to the standard “second price” auction model—where the top bidder pays a penny above the second-highest—the lawsuit alleges that Amazon, in nearly 80% of cases, billed advertisers their own winning bid, artificially raising prices for more than a million marketplace advertisers.
The FTC and states argue in the complaint, “Amazon overrides and replaces the actual auction results with higher prices set by Amazon to increase its profits.” According to the lawsuit, these methods sprang from the company’s disappointment with auction revenues, with the added costs being pushed onto consumers, resulting in “substantial injury” that continues for shoppers.
Amazon Issues Denial, Market Response
The company has responded that it “strongly disagrees” with these claims, labeling the suit “misguided.” Amazon emphasized in its statement that the FTC “fundamentally misunderstands how advertisers operate,” and reiterated that brands react to campaign performance data rather than focusing on the specifics of the auction structure.
Amazon further noted that “average winning bids fell 50% from 2019 to 2025 on Sponsored Products search ads,” and said “roughly 92% of placed ads are not given to the highest bid.” The company maintained that the public perception of the case’s effect on consumer pricing is incorrect. Shortly after news of the legal action broke, Amazon’s shares declined by 2.5% by the end of Monday’s trading session.
Regulatory Pressure Mounts
This case adds to an escalating series of regulatory challenges Amazon faces in the US. In a recent and separate matter, Amazon reached a $2.5 billion settlement with the FTC on charges that it had enrolled millions of users in its Prime subscription without clear consent and complicated the cancellation process, resulting in both civil fines and consumer reimbursements.
Competition for “Sponsored” ad positions at the top of Amazon’s search rankings is intense among brands and sellers, as they bid for key placement every time a shopper searches by keyword. As this auction-based model has evolved into a major profit source for Amazon, its fairness is being scrutinized by authorities at both state and federal levels.
What Comes Next
The resolution of this FTC lawsuit may set new standards for the advertising practices of leading digital platforms. With billions of dollars and the interests of both advertisers and consumers on the line, industry representatives and regulators alike are monitoring future developments in the dispute between Amazon and US authorities.
Additional insights into Amazon’s ad business and broader industry trends are available in stories such as “Why does Amazon have no Western rivals?” and other coverage regarding advertising and regulatory developments related to the company.