The US Federal Trade Commission (FTC) has taken legal action against Amazon, accusing the company of unlawfully overcharging over a million advertisers through manipulative auction practices designed to inflate ad prices. This lawsuit involves both the FTC and a bipartisan coalition of 22 states and was filed on Monday in Washington state, which is home to Amazon’s headquarters.
The legal filing claims that Amazon’s alleged practices could have led to $20 billion in revenue from advertisers since 2019. The complaint specifically points to Amazon’s conduct in “second price” auctions, where advertisers anticipate paying just marginally more than the second-highest bid but are allegedly charged their own full bid by Amazon around 80% of the time.
Amazon’s Defence and Market Impact
Amazon has firmly rejected the lawsuit’s accusations, labeling them as “misguided”. The company contends that the FTC has underestimated how advertisers operate, arguing that advertisers adjust their bids based on the performance of their advertisements rather than the auction system’s technicalities. Amazon also stated that the average winning bids for Sponsored Products search ads have decreased by 50% from 2019 to 2025, and that approximately 92% of ads are not awarded to the highest bid.
The announcement of the lawsuit has already had a tangible effect on Amazon’s market performance, with the company’s shares seeing a 2.5% drop by the close of trading on Monday.
Allegations of Consumer Impact
The FTC and the states argue that this alleged overcharging strategy by Amazon not only impacts advertisers but also consumers, as increased advertising costs may be transferred to shoppers in the form of higher prices. The complaint highlights the substantial injuries consumers face as a result of these practices.
This isn’t Amazon’s first encounter with the FTC. In a recent settlement last year, Amazon agreed to a $2.5 billion payout related to unauthorized enrollments of consumers into its Prime subscription service, which included civil fines and consumer reimbursements.
Reporting based on coverage first published by bbc.co.uk.