The U.S. Federal Trade Commission (FTC) and a bipartisan coalition of 22 states have filed a lawsuit accusing Amazon of secretly manipulating online auctions to overcharge more than a million advertising customers. The lawsuit, filed Monday in Washington, alleges that the e-commerce giant has inflated prices and increased its profits by overriding auction results with higher, Amazon-set prices since 2019, potentially accumulating $20 billion from advertisers.
According to the complaint, Amazon's alleged scheme harmed consumers as well, with extra costs being passed on to shoppers. The FTC and the states assert that consumers have suffered and will continue to experience substantial injury as a result of these practices.
Amazon has strongly refuted the allegations, stating in a release that the FTC "fundamentally misunderstands how advertisers operate." The company contends that the lawsuit is misguided and that advertisers adjust their bids based on performance, not auction mechanics. Amazon also claims that average winning bids on Sponsored Products search ads have decreased by 50% between 2019 and 2025, and that approximately 92% of placed ads are not awarded to the highest bidder.
The lawsuit details accusations that Amazon charged advertisers more than anticipated in "second price" auctions, where advertisers typically expect to pay one cent more than the next highest bidder. However, the complaint alleges that Amazon charged its Sponsored Products advertisers their own winning bid price nearly 80% of the time. The company's methods, the lawsuit states, were implemented because it was dissatisfied with the revenue generated by its advertising auctions.
Amazon's shares saw a decline, closing 2.5% lower on Monday following the announcement of the lawsuit.
This is not the first legal entanglement between Amazon and the FTC. Last year, Amazon settled a separate case with the FTC for $2.5 billion. That settlement addressed allegations that the company enrolled consumers into its Prime subscription service without consent and intentionally made it difficult for users to cancel their subscriptions. The settlement included civil penalties and provisions for consumer refunds.