FTC and 22 States Sue Amazon Over Alleged Ad Price Manipulation

The Amazon logo is seen at one of its offices. The US Federal Trade Commission (FTC) and a bipartisan group of 22 states have filed a lawsuit against Amazon, alleging that the company overcharged more than a million advertising customers by manipulating online auctions used to set ad prices. The lawsuit, filed on Monday, claims that the alleged scheme has generated approximately $20 billion from advertising customers since 2019. According to the complaint, Amazon overrides actual auction results with higher prices to increase its profits. In a statement to the BBC, Amazon expressed strong disagreement with the lawsuit's premise and called it misguided. The FTC and the states also claim that Amazon's actions have harmed consumers, as the extra costs are passed onto shoppers. The complaint states, "Consumers are suffering, have suffered, and will continue to suffer substantial injury as a result," which prompted a response from Amazon. The company stated, "The FTC wants the public to believe this case is about higher prices for consumers. It is not." Following the announcement of the lawsuit, Amazon's shares fell 2.5% on Monday. Many brands and sellers compete on Amazon to place Sponsored Product ads and Sponsored Brands ads when consumers search for products using keywords on the platform. These placements are auctioned off to the highest bidder. The complaint alleges that Amazon secretly charged advertisers more in so-called "second price" auctions, where advertisers expect to pay one cent more than the next highest bidder for each bid they win. However, the complaint claims that Amazon has charged its Sponsored Products advertisers their own winning bid nearly 80% of the time. The lawsuit states that Amazon's methods were prompted by dissatisfaction with the revenue generated from its advertising auctions. Amazon responded by asserting that the FTC fundamentally misunderstands how advertisers operate, noting that advertisers adjust bids based on real-world performance. The company added that average winning bids fell 50% from 2019 to 2025 on Sponsored Products search ads, and approximately 92% of placed ads are not awarded to the highest bid. Amazon has previously faced scrutiny from the FTC, settling a case last year regarding the enrollment of consumers in its Prime subscription without consent, resulting in a settlement of $2.5 billion, including civil penalties and consumer refunds.