The U.S. Federal Trade Commission (FTC) together with a bipartisan coalition of 22 states has launched a lawsuit claiming that Amazon covertly overcharged more than a million advertising customers by rigging the online auctions used to determine ad prices.
According to the complaint filed on Monday, the alleged scheme has generated roughly $20 billion in revenue from advertisers since 2019.
“Amazon substitutes the real auction outcomes with inflated prices set by Amazon to boost its profits,” the complaint filed in Washington state asserts.
In a statement to the BBC, Amazon “strongly disagrees” with the allegation that it misled advertisers and described the lawsuit as “misguided.”
Beyond advertisers, the FTC, a U.S. consumer watchdog, and the states argue that Amazon’s customers have also been harmed, as the added costs are ultimately passed on to shoppers.
“Consumers are suffering, have suffered, and will continue to endure substantial injury,” the complaint asserts, prompting an immediate rebuttal from Amazon.
“The FTC wants the public to believe this case concerns higher consumer prices. It does not,” Amazon said in its statement.
The company’s shares slipped after the announcement, closing 2.5% lower on Monday.
Numerous brands and sellers compete on Amazon to place Sponsored Product and Sponsored Brands ads when consumers search for products using keywords on Amazon’s e‑commerce platform.
These placements are then auctioned to the highest bidder.
The complaint accuses Amazon of secretly charging advertisers higher amounts in so‑called “second‑price” auctions, where prospective advertisers expect to pay only a penny more than the next highest bid for each win.
In practice, the complaint alleges, Amazon has charged its Sponsored Products advertisers close to 80% of their winning bids.
The lawsuit states that Amazon’s tactics were driven by its dissatisfaction with the revenue generated from its advertising auctions.
Amazon responded, saying the FTC “fundamentally misunderstands how advertisers operate.”
“Advertisers adjust bids based on real‑world performance, not on descriptions of auction mechanics,” Amazon said in its statement.
“Average winning bids fell by 50% from 2019 to 2025 on Sponsored Products search ads, and roughly 92% of placed ads are not awarded to the highest bidder,” the company added.
Amazon has previously clashed with the consumer watchdog.
Last year, it settled a case with the FTC alleging that it enrolled millions of consumers in its Prime subscription program without their consent and made it intentionally difficult for them to cancel.
Amazon settled the case for $2.5 billion, which included civil penalties and consumer refunds.